The Dark Side of Corporate Social Responsibility: The Case of Director Information Acquisition

Using the staggered enactment of state-level constituency statutes as an exogenous shock to corporate social responsibility, we find that directors’ information acquisition intensity, measured by the return for their trading of company shares, decreases by 4% after the enactment. Our results are consistent with the argument that allowing directors to consider stakeholders’ interests makes directors less accountable. We further show that the effect is more pronounced when directors either have less incentive to collect information or it is more costly to do so. Last, less informed directors seem to be less effective monitors but not less effective advisors.