Description:
I examine the influence of labor and labor-related capital structure bargaining shields on determinants of voluntary, stand-alone CSR reporting to better understand how the demand for voluntary non-financial disclosure, embodied by CSR reporting, arises. Like shareholders, employees hold contracts with the firm that arise optimally in response to particular market frictions. But unlike shareholders, employees are exposed to and motivated by unemployment risk and, as firms can abrogate contracts and terminate employees in bankruptcy, default risk. I find firms with high labor pressure are more likely to initiate disclosure of CSR activities. I also find the likelihood of CSR reporting is statistically higher as leverage increases in a sample with high labor pressure, as compared to a sample with low labor pressure. My findings suggest labor influences voluntary CSR disclosures and also that labor-related capital structure strategy influences voluntary non-financial disclosure activity