# Construction and Analysis of Corporate Social Responsibility Report and Equity Capital Cost Algorithm Model Based on Intelligent Computing

Authors: Jinglei Liu; Jinnan Sun; Minjian Fang
Journal: Security and Communication Networks
 (2022)

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## Abstract

In order to study the corporate social responsibility report and equity capital cost algorithm based on Intelligent Computing, this paper explores the relationship between social responsibility reports and the cost of equity capital based on the data of Chinese A-share listed companies from 2016 to 2020 using textual analysis and multiple statistical regression. The research results show that the publication of social responsibility reports by listed companies helps reduce the cost of equity capital and has a “first disclosure” effect; that is, the negative effect on the cost of equity capital tends to be more significant for companies that publish social responsibility reports for the first time; and the higher the quality of social responsibility reports, the more it helps companies to reduce their cost of equity capital.


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## Body

## 1. Introduction

### 1.1. Corporate Social Responsibility Report

The corporate social responsibility report (CSR report for short) mainly includes sections such as company overview, corporate culture, organizational structure, scientific development, safety responsibility, environmental responsibility, social responsibility, employee development responsibility, and community involvement and development. That is, corporate social responsibility means that while creating profits and being responsible to shareholders, enterprises should also bear the responsibility to workers, consumers, the environment, communities, and other stakeholders. Its core is to protect the legitimate rights and interests of workers, including nondiscrimination, nonuse of child labor, nonuse of forced labor, and safe and healthy working environment and system. CSR report is an important bridge for enterprises to disclose their philosophy, strategy, ways, and means of fulfilling social responsibility to stakeholders and can publicly disclose other nonfinancial information such as direct and indirect impacts of business activities on economic, environmental, and social fields, alleviating the information asymmetry between enterprises and external investors [1].CSR reporting is mainly due to the fact that, in today’s increasingly complex business environment, traditional monetary-based financial information cannot fully reflect the value of a company and the opportunities and risks it faces. At the same time, issues such as employee welfare, environmental pollution, and product quality arising from traditional operations aimed at maximizing shareholders’ profits are attracting increasing attention from all sectors of society [2]. The resulting pressure requires companies to be accountable to a wider range of stakeholders than just shareholders in order to achieve sustainable corporate operations.


### 1.2. Corporate Financing Costs

Enterprises need to consider the cost of obtaining the funds, that is, financing cost, when they carry out financing. Enterprise financing mainly includes two channels, endogenous financing and exogenous financing, of which endogenous financing mainly refers to the enterprise’s own funds and the accumulated funds in the process of production and operation; exogenous financing mainly includes equity financing and debt financing [3]. Equity financing mainly includes financing activities using equity such as initial public offering (IPO) and share allotment and issuance; debt financing mainly refers to financing activities using debt such as loans from banks and nonbank financial institutions. For equity financing, the cost is often related to the company’s own production and operation conditions and the company’s future business development expectations.


### 1.3. Big Data Text Analytics

Text analysis refers to the representation of text and the selection of its feature terms. Text analysis is a fundamental problem in text mining and information retrieval, and the method extracts feature words from text and quantifies them to represent text information. Big data text analysis method, a text analysis model that emerged with the development of computer science, has advantages such as comprehensiveness and objectivity compared with traditional text analysis and is increasingly applied to social science fields such as economics and sociology. Big data text analysis method, combined with the enterprise’s own attributes, is used to analyze the social responsibility report of listed companies, which can dig out the situation of the enterprise’s fulfillment of social responsibility and provide reference for investment and enterprise operation.In this paper, a deep learning algorithm based on Word2Vec [4, 5] is used for text analysis of CSR reports. After data preprocessing, the preprocessed text is vectorized by Word2Vec model with word embedding technology to extract the text features of the report and output the results. The basic process about big data text analysis is shown in Figure 1.Figure 1
Basic flow chart of text classification.


## 1.1. Corporate Social Responsibility Report

The corporate social responsibility report (CSR report for short) mainly includes sections such as company overview, corporate culture, organizational structure, scientific development, safety responsibility, environmental responsibility, social responsibility, employee development responsibility, and community involvement and development. That is, corporate social responsibility means that while creating profits and being responsible to shareholders, enterprises should also bear the responsibility to workers, consumers, the environment, communities, and other stakeholders. Its core is to protect the legitimate rights and interests of workers, including nondiscrimination, nonuse of child labor, nonuse of forced labor, and safe and healthy working environment and system. CSR report is an important bridge for enterprises to disclose their philosophy, strategy, ways, and means of fulfilling social responsibility to stakeholders and can publicly disclose other nonfinancial information such as direct and indirect impacts of business activities on economic, environmental, and social fields, alleviating the information asymmetry between enterprises and external investors [1].CSR reporting is mainly due to the fact that, in today’s increasingly complex business environment, traditional monetary-based financial information cannot fully reflect the value of a company and the opportunities and risks it faces. At the same time, issues such as employee welfare, environmental pollution, and product quality arising from traditional operations aimed at maximizing shareholders’ profits are attracting increasing attention from all sectors of society [2]. The resulting pressure requires companies to be accountable to a wider range of stakeholders than just shareholders in order to achieve sustainable corporate operations.


## 1.2. Corporate Financing Costs

Enterprises need to consider the cost of obtaining the funds, that is, financing cost, when they carry out financing. Enterprise financing mainly includes two channels, endogenous financing and exogenous financing, of which endogenous financing mainly refers to the enterprise’s own funds and the accumulated funds in the process of production and operation; exogenous financing mainly includes equity financing and debt financing [3]. Equity financing mainly includes financing activities using equity such as initial public offering (IPO) and share allotment and issuance; debt financing mainly refers to financing activities using debt such as loans from banks and nonbank financial institutions. For equity financing, the cost is often related to the company’s own production and operation conditions and the company’s future business development expectations.


## 1.3. Big Data Text Analytics

Text analysis refers to the representation of text and the selection of its feature terms. Text analysis is a fundamental problem in text mining and information retrieval, and the method extracts feature words from text and quantifies them to represent text information. Big data text analysis method, a text analysis model that emerged with the development of computer science, has advantages such as comprehensiveness and objectivity compared with traditional text analysis and is increasingly applied to social science fields such as economics and sociology. Big data text analysis method, combined with the enterprise’s own attributes, is used to analyze the social responsibility report of listed companies, which can dig out the situation of the enterprise’s fulfillment of social responsibility and provide reference for investment and enterprise operation.In this paper, a deep learning algorithm based on Word2Vec [4, 5] is used for text analysis of CSR reports. After data preprocessing, the preprocessed text is vectorized by Word2Vec model with word embedding technology to extract the text features of the report and output the results. The basic process about big data text analysis is shown in Figure 1.Figure 1
Basic flow chart of text classification.


## 2. Contribution of This Article

The contribution of this paper is mainly reflected in expanding the research direction of the relationship between social responsibility and corporate finance, investigating the relationship between corporate social responsibility report and its quality and equity financing cost, expanding the research scope of the impact of social responsibility on corporate financing, and putting forward that social responsibility affects not only loan decision-making but also financing cost. The results show that the release of social responsibility report helps to reduce the cost of equity financing. As an important nonfinancial information, corporate social responsibility report is as important as traditional financial information in affecting corporate financing cost.


## 3. Theoretical Analysis and Research Hypothesis

### 3.1. CSR Reporting and Cost of Equity

Investors need to refer to various relevant information of enterprises when making investment decisions. For the social responsibility report disclosed by the company, it conveys to the market the fulfillment of the company’s social responsibility, from which investors can get relevant basis to help make investment decisions [6].Due to the information asymmetry between firms and investors, investors are often in a vulnerable position when investing [7]. In response to the risk brought by the lack of information, investors will demand that enterprises pay financing costs as their risk compensation. The CSR information studied in this paper is nonfinancial information, which reduces the investment risk of investors [8–10]. Therefore, investors tend to accept a lower rate of return for companies that disclose CSR information, which is directly reflected in the reduction of the cost of equity capital for companies. Globally, especially in stakeholder-oriented markets, the disclosure of social responsibility reports often brings benefits to corporate equity financing, and the reduction of equity financing costs is, to some extent, one of the motives for corporate disclosure of social responsibility information [11]. Based on this, this paper proposes the following hypothesis:H1: Companies that disclose their CSR reports receive lower cost of equity than those that do not.


### 3.2. First Release of CSR Report with Its Cost of Equity

The first release of corporate social responsibility report means that enterprises take the initiative to transmit social responsibility information to the society for the first time. Compared with the enterprises that have not released the corporate social responsibility report and continue to release the corporate social responsibility report, the first report not only represents a qualitative leap in the performance of corporate social responsibility but also reflects the great efforts made by enterprises to establish a good reputation of social responsibility. Therefore, the investment and financing effect brought by the first report should be more obvious. To this end, the following assumption is made in this paper:H2: Compared to non-first-time releases, first-time releases of CSR reports are more helpful in reducing the cost of equity for companies.


### 3.3. Quality of CSR Disclosure and Cost of Equity

The information disclosed by each company varies in quality dimensions such as content and level of detail, and social responsibility information of different quality can have different degrees of usefulness to investors.A good reputation is a unique resource possessed by an enterprise, which can enhance the competitiveness of the enterprise in all aspects of its operation. With the development of China’s economy, the domestic market gradually tends to be effective. As the market becomes more competitive and the homogeneity of products and services grows, the difference in corporate culture reputation beyond the product itself becomes more and more important in the competition.Cao et al. used Fortune’s “America’s Most Admired Companies” reputation list as a sample and found that highly reputable companies generally enjoy lower cost of equity [12]. At the same time, a better reputation of a company can convey positive signals to investors such as good business conditions and low business risks. Therefore, in the face of companies with high quality CSR report disclosure, investors have more valid information, which reduces the investment risk and consequently requires lower returns and lowers the financing cost of the company [13–15]. Therefore, we make the following assumption:H3: The higher the quality of the social responsibility report disclosed by the company, the lower the financing cost of the company.


## 3.1. CSR Reporting and Cost of Equity

Investors need to refer to various relevant information of enterprises when making investment decisions. For the social responsibility report disclosed by the company, it conveys to the market the fulfillment of the company’s social responsibility, from which investors can get relevant basis to help make investment decisions [6].Due to the information asymmetry between firms and investors, investors are often in a vulnerable position when investing [7]. In response to the risk brought by the lack of information, investors will demand that enterprises pay financing costs as their risk compensation. The CSR information studied in this paper is nonfinancial information, which reduces the investment risk of investors [8–10]. Therefore, investors tend to accept a lower rate of return for companies that disclose CSR information, which is directly reflected in the reduction of the cost of equity capital for companies. Globally, especially in stakeholder-oriented markets, the disclosure of social responsibility reports often brings benefits to corporate equity financing, and the reduction of equity financing costs is, to some extent, one of the motives for corporate disclosure of social responsibility information [11]. Based on this, this paper proposes the following hypothesis:H1: Companies that disclose their CSR reports receive lower cost of equity than those that do not.


## 3.2. First Release of CSR Report with Its Cost of Equity

The first release of corporate social responsibility report means that enterprises take the initiative to transmit social responsibility information to the society for the first time. Compared with the enterprises that have not released the corporate social responsibility report and continue to release the corporate social responsibility report, the first report not only represents a qualitative leap in the performance of corporate social responsibility but also reflects the great efforts made by enterprises to establish a good reputation of social responsibility. Therefore, the investment and financing effect brought by the first report should be more obvious. To this end, the following assumption is made in this paper:H2: Compared to non-first-time releases, first-time releases of CSR reports are more helpful in reducing the cost of equity for companies.


## 3.3. Quality of CSR Disclosure and Cost of Equity

The information disclosed by each company varies in quality dimensions such as content and level of detail, and social responsibility information of different quality can have different degrees of usefulness to investors.A good reputation is a unique resource possessed by an enterprise, which can enhance the competitiveness of the enterprise in all aspects of its operation. With the development of China’s economy, the domestic market gradually tends to be effective. As the market becomes more competitive and the homogeneity of products and services grows, the difference in corporate culture reputation beyond the product itself becomes more and more important in the competition.Cao et al. used Fortune’s “America’s Most Admired Companies” reputation list as a sample and found that highly reputable companies generally enjoy lower cost of equity [12]. At the same time, a better reputation of a company can convey positive signals to investors such as good business conditions and low business risks. Therefore, in the face of companies with high quality CSR report disclosure, investors have more valid information, which reduces the investment risk and consequently requires lower returns and lowers the financing cost of the company [13–15]. Therefore, we make the following assumption:H3: The higher the quality of the social responsibility report disclosed by the company, the lower the financing cost of the company.


## 4. Study Design

### 4.1. Data Source and Processing

This paper adopts the method of big data text analysis keywords, based on the database of the official website of SSE, and uses the annual CSR reports of all 4718Chinese A-share listed companies from 2016 to 2020 as the initial research samples and uses the WinGo financial text data platform to quantify the texts. The CSR report quality score data used in this paper were obtained by manually collecting the CSR information scores of listed companies published by Hexun.com. The data for the cost of equity capital calculation in this paper were sourced from the financial data of the financial statements of major listed companies on Juchao Information Website.The data processing steps are as follows: (1) Download the annual corporate responsibility report of A-share listed companies for 2016–2020 from the official website of SSE. (2) Convert PDF documents into TXT documents with the help of WinGo financial text data platform and clean the data to eliminate scanned documents and missing documents. (3) Adopt WinGo Financial Text Splitting System to split the text content and remove deactivated words based on financial-specific dictionaries such as the English-Chinese Dictionary of Modern Finance and Accounting, thus transforming unstructured text data into word vectors for storage. (4) Word frequencies of word sets composed of various subwords and their expansions are calculated. (5) Data processing was done using SAS and Excel software, and empirical regression analysis was done using SPSS and Python software. (6) Missing values were excluded. To avoid the effect of extreme values, all continuous variables were subjected to upper and lower 1% and 99% tail reduction in this paper.The following specifies the current situation and the selection of seed words for the textual analysis of the fulfillment of social responsibility by A-share listed companies in China.By analyzing the big data text keywords of corporate responsibility reports of listed companies, we can find that corporate fulfillment of social responsibility mainly focuses on employees, environmental protection, safety, quality, innovation, and poverty alleviation.The most frequently occurring keyword is “employee training,” which is used as a seed word to expand the set of words that appear in the CSR reports of Chinese A-share listed companies in the 2016 to 2020, with appearance of 235620 times and a percentage of 1.09% in all the report texts. Further mining of the text reveals that employees are an important part of corporate social responsibility, and focusing on employee rights protection, training and development, physical and mental health, and other welfare aspects are important initiatives for corporate social responsibility.The second and third most frequently occurring keywords are “innovation” and “environmental protection,” respectively, which are used as seed words for expansion. The percentages are 0.69% and 0.65%, respectively. It can be seen that, in terms of innovation, enterprises take technological innovation and product innovation as the main direction of undertaking social responsibility; in terms of undertaking responsibility for environmental protection, enterprises mainly take into account several aspects such as pollution emission control, promoting green development, and environmental protection.The fifth and sixth most frequently appearing keywords are “safety” and “poverty alleviation,” with percentages of 0.59% and 0.44%, respectively. In terms of safety, enterprises’ social responsibility mainly focuses on information security, production safety, and quality safety. In terms of poverty alleviation, the attitude of enterprises in fulfilling social responsibility is positive, and the fulfillment of poverty alleviation responsibility is mainly carried out in the form of planning.The seed words are expanded using Word2Vec based on the neural network word embedding method, and the words are represented as multidimensional vectors based on contextual semantic information, and the semantic similarity between the words is obtained by calculating the similarity between the vectors. Specifically, this paper adopts the CBOW model (Continuous Bag-of-Words model) in Word2Vec to train the Chinese CSR report corpus [16].The objective function of the CBOW model is(1)L=max∑w∈Clogpw|Contextw,where C denotes the corpus; w denotes the central word; and Contextw denotes the context of the central word. The basic idea of CBOW model is to predict the probability of the current word based on the context, and, by maximizing the above objective function, the Word2Vec word vector corresponding to the central word can be finally obtained. Subsequently, the similarity of the central word can be obtained by calculating the similarity of the vector. The model is trained based on a large amount of financial texts, and the recommended similar words are more suitable for the financial text context, which can effectively avoid the subjectivity of human factors and the weak correlation of common synonym tools.The network structure of CBOW is shown in Figure2.Figure 2
CBOW network structure diagram.The selected seed words and their extensions in this paper are shown in Table1.Table 1
Selected seed words and their extensions in this paper.
Seed wordsExtended wordsStaff trainingTraining, training management, job training, internal training, talent development, employee training, on-the-job training, job, safety training, recruitment, training and education, preservice training, training assessment, talent recruitment, reserve cadres, training evaluation, internal training, annual training, employees, career planning, employee quality, performance management, personnel training, mentorship, training, training rotation, vocational training, employee performance, reserve talent introduction of talentsSecuritySafety management, production safety, safety production, safety and security, safety, safety and environmental protection, quality safety, environmental safety, product safety, food safety, system safety, safety and stability, personal safety, traffic safety, network safety, information security, safety and health, aviation safety, safety control, quality, environmental safety, environmental management, safety risk, protection, safety technology, road safety, data safety comprehensive governance, life safety, fire safetyPoverty alleviationPrecise poverty alleviation, help, poverty alleviation and development, targeted poverty alleviation, poverty alleviation and help, poverty alleviation, poverty alleviation and help, poverty-stricken areas, aid to Xinjiang, poverty alleviation, aid to Tibet, aid to education, help, poor villages, file establishment, help, poor households, poverty, recognition of relatives, poverty alleviation, public welfare, twinning, Wa, disaster relief, relief, Lahu, volunteerism, poverty alleviation counties, donation, donate to educationQualityQuality, product quality, product quality, service quality, quality and safety, engineering quality, quality control, quality management, construction quality, product qualification rate, technical quality, reliability, performance, quality standard, material quality, quality off, precision, quality assurance, quality assurance, qualification rate, surface quality, high quality, safety, commodity quality, procurement quality, service quality, quality inspection, efficiency, finished product rate quality, significant qualityEnvironmental protectionEnvironmental protection, energy saving and environmental protection, environmental protection governance, energy saving and emission reduction, safety and environmental protection, environmental protection and energy saving, pollution management, environmental governance, energy saving, environmental protection safety, environmental protection industry, environmental protection requirements, green, environmental protection equipment, ecological environmental protection, clean production, environmental management, environmental friendly, environmental protection engineering, environmental management, sewage, environmental pollution, energy saving and consumption reduction, safety production, three wastes, pollution prevention and control, environmental protection type, pollution control building energy saving, healthInnovationTechnological innovation, product innovation, technological innovation, innovation, innovation management, independent innovation, management innovation, pioneering innovation, innovation capability, reform innovation, innovation, business innovation, innovation service, change, innovation-driven, exploration, deepening, innovation, marketing innovation, leading, talent training, upgrading, concept, improvement, characteristics, technological innovation, optimization, new, creativity, product developmentThe statistical metrics of the seed word set selected in this paper are shown in Table2.Table 2
Statistical indicators of the seed word set.
MeanStdMin25%50%75%MaxCountStaff training0.0119310.0050090.0000000.0082930.0115090.0151080.0324423429Security0.0061750.0042080.0000000.0029040.0056250.0086040.0385323429Poverty alleviation0.0042850.0046630.0000000.0012380.0028290.0058520.0485303429Quality0.0055010.0032240.0000000.0030460.0051860.0075040.0346303429Environmental protection0.0069290.0038780.0000000.0042330.0065420.0090790.0316743429Innovation0.0064620.0029100.0000000.0043880.0060850.0082220.0233203429


### 4.2. Variable Design

#### 4.2.1. Explained Variables

Cost of Equity (COE) Capital. Since the PEG model [17] has a more appropriate grasp of the risk factors affecting the cost of equity capital and is more applicable to the Chinese capital market, this paper adopts the PEG model to calculate the cost of equity capital, and the model expression is as follows:(2)RPEG,n−1=EPSn−EPSn−1EPSn−EPSn−1EPSn−EPSn−1P0. In the above formula, RPEG,n−1 denotes the cost of equity capital for period n − 1. EPSn denotes the earnings per share for period n. EPSn−1 denotes the expected earnings per share for period n − 1. P0 denotes the share price per share.


#### 4.2.2. Explanatory Variables

(1)
social responsibility (CSR) report disclosure. This variable is taken as a 0–1 dummy variable. It takes the value of 1 if the listed company publishes a social responsibility report; otherwise, it takes the value of 0. In hypothesis H1, this variable is the explanatory variable.(2)
social responsibility report for the first disclosure (FYCSR). This variable is taken as a 0–1 dummy variable. It takes the value of 1 if the listed company publishes a social responsibility report for the first time; otherwise, it takes the value of 0. In hypothesis H2, this variable is the explanatory variable.(3)
social responsibility report quality (CSRQua). This paper is based on the information quality scores of social responsibility reports of listed companies published by Hexun.com, except 100 to control for the effect of extreme differences being too large on the regression coefficients. The reason for choosing Hexun.com for social responsibility report quality evaluation is that the system provides professional measurement results of social responsibility of all listed companies, and the research sample is comprehensive and complete, which can effectively avoid the selective bias of the sample. Meanwhile, the evaluation system classifies CSR into five modules: shareholders’ responsibility, employees’ responsibility, suppliers’ responsibility, environmental responsibility, and charity responsibility, which is basically consistent with the classification of CSR in the Guidelines on Social Responsibility of Listed Companies issued by Shenzhen Stock Exchange in 2006. Therefore, this paper measures the quality of social responsibility reports, including the total quality of corporate social responsibility reports (CSRQua) and the quality of five subresponsibility reports, namely, the quality of shareholder responsibility reports (CSRQua1), the quality of employee responsibility reports (CSRQua2), the quality of supplier responsibility reports (CSRQua3), the quality of environmental responsibility reports (CSRQua4), and the quality of charitable responsibility reports (CSRQua5). In hypothesis H3, all of the above variables are explanatory variables.


#### 4.2.3. Control Variables

Considering that firm size, solvency, profitability, and risk profile are also major factors affecting the cost of equity financing, the following relevant factors are selected as control variables in this paper [18].The size of the firm (SIZE) is the natural logarithm of the firm’s total assets, which reflects the adequacy of the firm’s resources; the larger the firm’s size is, the more resources it has available and the lower the cost of capital is. Equity ratio (LEV), corporate cash flow ratio (CFA), and tangible asset to liability ratio (TL) can reflect a company’s solvency, and, in general, the lower the equity ratio, the higher the level of cash flow, and the higher the tangible asset to liability ratio, the lower the cost of equity. Return on assets (ROA) reflects the profitability of the company; the higher the profitability is, the less likely it is to default, the safer the creditor’s capital is, and the lower the cost of equity capital is. The book-to-market (BM) ratio reflects the risk profile of a company. The smaller the BM ratio is, the higher the value of a company’s stock is, the more its operations will be viewed favorably by the market, the lower the risk of default is, and the lower the cost of equity capital is. Also, the firm age (AGE), industry (IND), and year (YEAR) variables are selected to control for time and industry effects.The specific definitions of the study variables in this paper are given in Table3.Table 3
Variable descriptions.
Variable typeVariable symbolsVariable definitionExplained variablesCOECost of equity capital, i.e., the rate of return required by shareholdersExplanatory variablesCSRCorporate social responsibility report, the sample company disclosing social responsibility report in the year takes the value of 1; otherwise, it takes the value of 0FYCSRFirst report, the first social responsibility report issued during the study period takes the value of 1; otherwise, it takes the value of 0NeverNever published a social responsibility report during the periodCSRQuaTotal social responsibility report score, i.e., Hexun’s listed companiesCSRQua1Shareholder responsibility report quality, i.e., Hexun’s shareholder responsibility score divided by 100CSRQua2Quality of employee responsibility report, i.e., Hexun’s employee responsibility score divided by 100CSRQua3Supplier responsibility report quality, i.e., Hexun’s supplier, customer, and consumer responsibility scores divided by 100CSRQua4Quality of environmental reporting, i.e., Hexun’s environmental responsibility score divided by 100CSRQua5Charity report quality, i.e., Hexun’s social responsibility score divided by 100Control variablesSIZECompany size, i.e., the natural logarithm of the company’s total assets at the end of the yearLEVTotal liabilities/owner’s equityCFACash flow ratio, i.e., net cash flow/average total assetsTLTangible asset to debt ratio, i.e., average tangible assets/average liabilitiesROAReturn on assets, i.e., net profit after tax/total assets of the enterpriseBMBook-to-market ratio, i.e., total book assets of the company/market valueAGEAge of the company, i.e., the age of the company from inception to the corresponding study yearYEARYear dummy variable, sample for a particular year (2020 year) takes the value of 1; otherwise, it takes the value of 0INDIndustry dummy variable, sample for a specific industry (e.g., banking industry) takes the value of 1; otherwise, it takes the value of 0. Industry division refers to the SEC’s industry classification standards, in which the manufacturing industry is subdivided by secondary directory


### 4.3. Model Design

To control for possible endogeneity problems, a multiple linear regression model is developed to regress the cost of debt capital at yeart + 1 using data at year t. The regression model expression is as follows:(3)CODi,t+1=α0+α1Explaini,t+∑αControlsi,t+∑Industry+∑YEAR+εi,t. From the above formula, Explain in testing hypothesis H1 is the CSRi,t variable, in testing hypothesis H2 is FYCSRi,t variables, and in testing hypothesis H3 are CSRQuai,t、CSRQua1i,t、CSRQua2i,t、CSRQua3i,t、CSRQua4i,t、CSRQua5i,t variables. ε is the random error term. Controls is shown as follows:(4)∑αControlsi,t=α2SIZEi,t+α3LEVi,t+α4CFAi,t+α5TLi,t+α6ROAi,t+α7BMi,t+α8AGEi,t.They all assume that the quantity of H2 in the equation is different, so they can get the value of H1 at the same time.


## 4.1. Data Source and Processing

This paper adopts the method of big data text analysis keywords, based on the database of the official website of SSE, and uses the annual CSR reports of all 4718Chinese A-share listed companies from 2016 to 2020 as the initial research samples and uses the WinGo financial text data platform to quantify the texts. The CSR report quality score data used in this paper were obtained by manually collecting the CSR information scores of listed companies published by Hexun.com. The data for the cost of equity capital calculation in this paper were sourced from the financial data of the financial statements of major listed companies on Juchao Information Website.The data processing steps are as follows: (1) Download the annual corporate responsibility report of A-share listed companies for 2016–2020 from the official website of SSE. (2) Convert PDF documents into TXT documents with the help of WinGo financial text data platform and clean the data to eliminate scanned documents and missing documents. (3) Adopt WinGo Financial Text Splitting System to split the text content and remove deactivated words based on financial-specific dictionaries such as the English-Chinese Dictionary of Modern Finance and Accounting, thus transforming unstructured text data into word vectors for storage. (4) Word frequencies of word sets composed of various subwords and their expansions are calculated. (5) Data processing was done using SAS and Excel software, and empirical regression analysis was done using SPSS and Python software. (6) Missing values were excluded. To avoid the effect of extreme values, all continuous variables were subjected to upper and lower 1% and 99% tail reduction in this paper.The following specifies the current situation and the selection of seed words for the textual analysis of the fulfillment of social responsibility by A-share listed companies in China.By analyzing the big data text keywords of corporate responsibility reports of listed companies, we can find that corporate fulfillment of social responsibility mainly focuses on employees, environmental protection, safety, quality, innovation, and poverty alleviation.The most frequently occurring keyword is “employee training,” which is used as a seed word to expand the set of words that appear in the CSR reports of Chinese A-share listed companies in the 2016 to 2020, with appearance of 235620 times and a percentage of 1.09% in all the report texts. Further mining of the text reveals that employees are an important part of corporate social responsibility, and focusing on employee rights protection, training and development, physical and mental health, and other welfare aspects are important initiatives for corporate social responsibility.The second and third most frequently occurring keywords are “innovation” and “environmental protection,” respectively, which are used as seed words for expansion. The percentages are 0.69% and 0.65%, respectively. It can be seen that, in terms of innovation, enterprises take technological innovation and product innovation as the main direction of undertaking social responsibility; in terms of undertaking responsibility for environmental protection, enterprises mainly take into account several aspects such as pollution emission control, promoting green development, and environmental protection.The fifth and sixth most frequently appearing keywords are “safety” and “poverty alleviation,” with percentages of 0.59% and 0.44%, respectively. In terms of safety, enterprises’ social responsibility mainly focuses on information security, production safety, and quality safety. In terms of poverty alleviation, the attitude of enterprises in fulfilling social responsibility is positive, and the fulfillment of poverty alleviation responsibility is mainly carried out in the form of planning.The seed words are expanded using Word2Vec based on the neural network word embedding method, and the words are represented as multidimensional vectors based on contextual semantic information, and the semantic similarity between the words is obtained by calculating the similarity between the vectors. Specifically, this paper adopts the CBOW model (Continuous Bag-of-Words model) in Word2Vec to train the Chinese CSR report corpus [16].The objective function of the CBOW model is(1)L=max∑w∈Clogpw|Contextw,where C denotes the corpus; w denotes the central word; and Contextw denotes the context of the central word. The basic idea of CBOW model is to predict the probability of the current word based on the context, and, by maximizing the above objective function, the Word2Vec word vector corresponding to the central word can be finally obtained. Subsequently, the similarity of the central word can be obtained by calculating the similarity of the vector. The model is trained based on a large amount of financial texts, and the recommended similar words are more suitable for the financial text context, which can effectively avoid the subjectivity of human factors and the weak correlation of common synonym tools.The network structure of CBOW is shown in Figure2.Figure 2
CBOW network structure diagram.The selected seed words and their extensions in this paper are shown in Table1.Table 1
Selected seed words and their extensions in this paper.
Seed wordsExtended wordsStaff trainingTraining, training management, job training, internal training, talent development, employee training, on-the-job training, job, safety training, recruitment, training and education, preservice training, training assessment, talent recruitment, reserve cadres, training evaluation, internal training, annual training, employees, career planning, employee quality, performance management, personnel training, mentorship, training, training rotation, vocational training, employee performance, reserve talent introduction of talentsSecuritySafety management, production safety, safety production, safety and security, safety, safety and environmental protection, quality safety, environmental safety, product safety, food safety, system safety, safety and stability, personal safety, traffic safety, network safety, information security, safety and health, aviation safety, safety control, quality, environmental safety, environmental management, safety risk, protection, safety technology, road safety, data safety comprehensive governance, life safety, fire safetyPoverty alleviationPrecise poverty alleviation, help, poverty alleviation and development, targeted poverty alleviation, poverty alleviation and help, poverty alleviation, poverty alleviation and help, poverty-stricken areas, aid to Xinjiang, poverty alleviation, aid to Tibet, aid to education, help, poor villages, file establishment, help, poor households, poverty, recognition of relatives, poverty alleviation, public welfare, twinning, Wa, disaster relief, relief, Lahu, volunteerism, poverty alleviation counties, donation, donate to educationQualityQuality, product quality, product quality, service quality, quality and safety, engineering quality, quality control, quality management, construction quality, product qualification rate, technical quality, reliability, performance, quality standard, material quality, quality off, precision, quality assurance, quality assurance, qualification rate, surface quality, high quality, safety, commodity quality, procurement quality, service quality, quality inspection, efficiency, finished product rate quality, significant qualityEnvironmental protectionEnvironmental protection, energy saving and environmental protection, environmental protection governance, energy saving and emission reduction, safety and environmental protection, environmental protection and energy saving, pollution management, environmental governance, energy saving, environmental protection safety, environmental protection industry, environmental protection requirements, green, environmental protection equipment, ecological environmental protection, clean production, environmental management, environmental friendly, environmental protection engineering, environmental management, sewage, environmental pollution, energy saving and consumption reduction, safety production, three wastes, pollution prevention and control, environmental protection type, pollution control building energy saving, healthInnovationTechnological innovation, product innovation, technological innovation, innovation, innovation management, independent innovation, management innovation, pioneering innovation, innovation capability, reform innovation, innovation, business innovation, innovation service, change, innovation-driven, exploration, deepening, innovation, marketing innovation, leading, talent training, upgrading, concept, improvement, characteristics, technological innovation, optimization, new, creativity, product developmentThe statistical metrics of the seed word set selected in this paper are shown in Table2.Table 2
Statistical indicators of the seed word set.
MeanStdMin25%50%75%MaxCountStaff training0.0119310.0050090.0000000.0082930.0115090.0151080.0324423429Security0.0061750.0042080.0000000.0029040.0056250.0086040.0385323429Poverty alleviation0.0042850.0046630.0000000.0012380.0028290.0058520.0485303429Quality0.0055010.0032240.0000000.0030460.0051860.0075040.0346303429Environmental protection0.0069290.0038780.0000000.0042330.0065420.0090790.0316743429Innovation0.0064620.0029100.0000000.0043880.0060850.0082220.0233203429


## 4.2. Variable Design

### 4.2.1. Explained Variables

Cost of Equity (COE) Capital. Since the PEG model [17] has a more appropriate grasp of the risk factors affecting the cost of equity capital and is more applicable to the Chinese capital market, this paper adopts the PEG model to calculate the cost of equity capital, and the model expression is as follows:(2)RPEG,n−1=EPSn−EPSn−1EPSn−EPSn−1EPSn−EPSn−1P0. In the above formula, RPEG,n−1 denotes the cost of equity capital for period n − 1. EPSn denotes the earnings per share for period n. EPSn−1 denotes the expected earnings per share for period n − 1. P0 denotes the share price per share.


### 4.2.2. Explanatory Variables

(1)
social responsibility (CSR) report disclosure. This variable is taken as a 0–1 dummy variable. It takes the value of 1 if the listed company publishes a social responsibility report; otherwise, it takes the value of 0. In hypothesis H1, this variable is the explanatory variable.(2)
social responsibility report for the first disclosure (FYCSR). This variable is taken as a 0–1 dummy variable. It takes the value of 1 if the listed company publishes a social responsibility report for the first time; otherwise, it takes the value of 0. In hypothesis H2, this variable is the explanatory variable.(3)
social responsibility report quality (CSRQua). This paper is based on the information quality scores of social responsibility reports of listed companies published by Hexun.com, except 100 to control for the effect of extreme differences being too large on the regression coefficients. The reason for choosing Hexun.com for social responsibility report quality evaluation is that the system provides professional measurement results of social responsibility of all listed companies, and the research sample is comprehensive and complete, which can effectively avoid the selective bias of the sample. Meanwhile, the evaluation system classifies CSR into five modules: shareholders’ responsibility, employees’ responsibility, suppliers’ responsibility, environmental responsibility, and charity responsibility, which is basically consistent with the classification of CSR in the Guidelines on Social Responsibility of Listed Companies issued by Shenzhen Stock Exchange in 2006. Therefore, this paper measures the quality of social responsibility reports, including the total quality of corporate social responsibility reports (CSRQua) and the quality of five subresponsibility reports, namely, the quality of shareholder responsibility reports (CSRQua1), the quality of employee responsibility reports (CSRQua2), the quality of supplier responsibility reports (CSRQua3), the quality of environmental responsibility reports (CSRQua4), and the quality of charitable responsibility reports (CSRQua5). In hypothesis H3, all of the above variables are explanatory variables.


### 4.2.3. Control Variables

Considering that firm size, solvency, profitability, and risk profile are also major factors affecting the cost of equity financing, the following relevant factors are selected as control variables in this paper [18].The size of the firm (SIZE) is the natural logarithm of the firm’s total assets, which reflects the adequacy of the firm’s resources; the larger the firm’s size is, the more resources it has available and the lower the cost of capital is. Equity ratio (LEV), corporate cash flow ratio (CFA), and tangible asset to liability ratio (TL) can reflect a company’s solvency, and, in general, the lower the equity ratio, the higher the level of cash flow, and the higher the tangible asset to liability ratio, the lower the cost of equity. Return on assets (ROA) reflects the profitability of the company; the higher the profitability is, the less likely it is to default, the safer the creditor’s capital is, and the lower the cost of equity capital is. The book-to-market (BM) ratio reflects the risk profile of a company. The smaller the BM ratio is, the higher the value of a company’s stock is, the more its operations will be viewed favorably by the market, the lower the risk of default is, and the lower the cost of equity capital is. Also, the firm age (AGE), industry (IND), and year (YEAR) variables are selected to control for time and industry effects.The specific definitions of the study variables in this paper are given in Table3.Table 3
Variable descriptions.
Variable typeVariable symbolsVariable definitionExplained variablesCOECost of equity capital, i.e., the rate of return required by shareholdersExplanatory variablesCSRCorporate social responsibility report, the sample company disclosing social responsibility report in the year takes the value of 1; otherwise, it takes the value of 0FYCSRFirst report, the first social responsibility report issued during the study period takes the value of 1; otherwise, it takes the value of 0NeverNever published a social responsibility report during the periodCSRQuaTotal social responsibility report score, i.e., Hexun’s listed companiesCSRQua1Shareholder responsibility report quality, i.e., Hexun’s shareholder responsibility score divided by 100CSRQua2Quality of employee responsibility report, i.e., Hexun’s employee responsibility score divided by 100CSRQua3Supplier responsibility report quality, i.e., Hexun’s supplier, customer, and consumer responsibility scores divided by 100CSRQua4Quality of environmental reporting, i.e., Hexun’s environmental responsibility score divided by 100CSRQua5Charity report quality, i.e., Hexun’s social responsibility score divided by 100Control variablesSIZECompany size, i.e., the natural logarithm of the company’s total assets at the end of the yearLEVTotal liabilities/owner’s equityCFACash flow ratio, i.e., net cash flow/average total assetsTLTangible asset to debt ratio, i.e., average tangible assets/average liabilitiesROAReturn on assets, i.e., net profit after tax/total assets of the enterpriseBMBook-to-market ratio, i.e., total book assets of the company/market valueAGEAge of the company, i.e., the age of the company from inception to the corresponding study yearYEARYear dummy variable, sample for a particular year (2020 year) takes the value of 1; otherwise, it takes the value of 0INDIndustry dummy variable, sample for a specific industry (e.g., banking industry) takes the value of 1; otherwise, it takes the value of 0. Industry division refers to the SEC’s industry classification standards, in which the manufacturing industry is subdivided by secondary directory


## 4.2.1. Explained Variables

Cost of Equity (COE) Capital. Since the PEG model [17] has a more appropriate grasp of the risk factors affecting the cost of equity capital and is more applicable to the Chinese capital market, this paper adopts the PEG model to calculate the cost of equity capital, and the model expression is as follows:(2)RPEG,n−1=EPSn−EPSn−1EPSn−EPSn−1EPSn−EPSn−1P0. In the above formula, RPEG,n−1 denotes the cost of equity capital for period n − 1. EPSn denotes the earnings per share for period n. EPSn−1 denotes the expected earnings per share for period n − 1. P0 denotes the share price per share.


## 4.2.2. Explanatory Variables

(1)
social responsibility (CSR) report disclosure. This variable is taken as a 0–1 dummy variable. It takes the value of 1 if the listed company publishes a social responsibility report; otherwise, it takes the value of 0. In hypothesis H1, this variable is the explanatory variable.(2)
social responsibility report for the first disclosure (FYCSR). This variable is taken as a 0–1 dummy variable. It takes the value of 1 if the listed company publishes a social responsibility report for the first time; otherwise, it takes the value of 0. In hypothesis H2, this variable is the explanatory variable.(3)
social responsibility report quality (CSRQua). This paper is based on the information quality scores of social responsibility reports of listed companies published by Hexun.com, except 100 to control for the effect of extreme differences being too large on the regression coefficients. The reason for choosing Hexun.com for social responsibility report quality evaluation is that the system provides professional measurement results of social responsibility of all listed companies, and the research sample is comprehensive and complete, which can effectively avoid the selective bias of the sample. Meanwhile, the evaluation system classifies CSR into five modules: shareholders’ responsibility, employees’ responsibility, suppliers’ responsibility, environmental responsibility, and charity responsibility, which is basically consistent with the classification of CSR in the Guidelines on Social Responsibility of Listed Companies issued by Shenzhen Stock Exchange in 2006. Therefore, this paper measures the quality of social responsibility reports, including the total quality of corporate social responsibility reports (CSRQua) and the quality of five subresponsibility reports, namely, the quality of shareholder responsibility reports (CSRQua1), the quality of employee responsibility reports (CSRQua2), the quality of supplier responsibility reports (CSRQua3), the quality of environmental responsibility reports (CSRQua4), and the quality of charitable responsibility reports (CSRQua5). In hypothesis H3, all of the above variables are explanatory variables.


## 4.2.3. Control Variables

Considering that firm size, solvency, profitability, and risk profile are also major factors affecting the cost of equity financing, the following relevant factors are selected as control variables in this paper [18].The size of the firm (SIZE) is the natural logarithm of the firm’s total assets, which reflects the adequacy of the firm’s resources; the larger the firm’s size is, the more resources it has available and the lower the cost of capital is. Equity ratio (LEV), corporate cash flow ratio (CFA), and tangible asset to liability ratio (TL) can reflect a company’s solvency, and, in general, the lower the equity ratio, the higher the level of cash flow, and the higher the tangible asset to liability ratio, the lower the cost of equity. Return on assets (ROA) reflects the profitability of the company; the higher the profitability is, the less likely it is to default, the safer the creditor’s capital is, and the lower the cost of equity capital is. The book-to-market (BM) ratio reflects the risk profile of a company. The smaller the BM ratio is, the higher the value of a company’s stock is, the more its operations will be viewed favorably by the market, the lower the risk of default is, and the lower the cost of equity capital is. Also, the firm age (AGE), industry (IND), and year (YEAR) variables are selected to control for time and industry effects.The specific definitions of the study variables in this paper are given in Table3.Table 3
Variable descriptions.
Variable typeVariable symbolsVariable definitionExplained variablesCOECost of equity capital, i.e., the rate of return required by shareholdersExplanatory variablesCSRCorporate social responsibility report, the sample company disclosing social responsibility report in the year takes the value of 1; otherwise, it takes the value of 0FYCSRFirst report, the first social responsibility report issued during the study period takes the value of 1; otherwise, it takes the value of 0NeverNever published a social responsibility report during the periodCSRQuaTotal social responsibility report score, i.e., Hexun’s listed companiesCSRQua1Shareholder responsibility report quality, i.e., Hexun’s shareholder responsibility score divided by 100CSRQua2Quality of employee responsibility report, i.e., Hexun’s employee responsibility score divided by 100CSRQua3Supplier responsibility report quality, i.e., Hexun’s supplier, customer, and consumer responsibility scores divided by 100CSRQua4Quality of environmental reporting, i.e., Hexun’s environmental responsibility score divided by 100CSRQua5Charity report quality, i.e., Hexun’s social responsibility score divided by 100Control variablesSIZECompany size, i.e., the natural logarithm of the company’s total assets at the end of the yearLEVTotal liabilities/owner’s equityCFACash flow ratio, i.e., net cash flow/average total assetsTLTangible asset to debt ratio, i.e., average tangible assets/average liabilitiesROAReturn on assets, i.e., net profit after tax/total assets of the enterpriseBMBook-to-market ratio, i.e., total book assets of the company/market valueAGEAge of the company, i.e., the age of the company from inception to the corresponding study yearYEARYear dummy variable, sample for a particular year (2020 year) takes the value of 1; otherwise, it takes the value of 0INDIndustry dummy variable, sample for a specific industry (e.g., banking industry) takes the value of 1; otherwise, it takes the value of 0. Industry division refers to the SEC’s industry classification standards, in which the manufacturing industry is subdivided by secondary directory


## 4.3. Model Design

To control for possible endogeneity problems, a multiple linear regression model is developed to regress the cost of debt capital at yeart + 1 using data at year t. The regression model expression is as follows:(3)CODi,t+1=α0+α1Explaini,t+∑αControlsi,t+∑Industry+∑YEAR+εi,t. From the above formula, Explain in testing hypothesis H1 is the CSRi,t variable, in testing hypothesis H2 is FYCSRi,t variables, and in testing hypothesis H3 are CSRQuai,t、CSRQua1i,t、CSRQua2i,t、CSRQua3i,t、CSRQua4i,t、CSRQua5i,t variables. ε is the random error term. Controls is shown as follows:(4)∑αControlsi,t=α2SIZEi,t+α3LEVi,t+α4CFAi,t+α5TLi,t+α6ROAi,t+α7BMi,t+α8AGEi,t.They all assume that the quantity of H2 in the equation is different, so they can get the value of H1 at the same time.


## 5. Analysis and Testing of Empirical Results

### 5.1. Content Validity

Content effectiveness refers to the matching degree between the measurement content and the measurement target, as well as the degree of measurement effectiveness.In order to verify the content validity of this study, we replace the selected seed word set into the selected CSR report, retrieve their sentences, and combine them with the context to verify the correlation between the seed word set and social responsibility. See Table4.Table 4
Examples of content validity test sections.
Staff training(Company) has always paid attention to staff training; in the training mode, the company adopts a combination of internal training and external training, “online + offline” way, strengthens the training of conventional business and professional skills, in strict accordance with the relevant national regulations, to ensure the follow-up of staff business level, through the normal training management. We provide more colorful training programs for employees through independent training platform, special training, and lectures and carry out talent training and cultivation in different categories for management talents, professional and technical talents, and new employees, so as to consolidate the construction of talent echelon.Security(Company) has established an emergency handling process for product safety accidents to ensure that the company can be properly handled in a timely manner in the event of a product quality event, accident, occupational health and safety accident, business accident, environmental accident, or other emergencies in the course of production and operation.Poverty alleviation(Company) actively participates in the national cause of precise poverty alleviation and continues to enhance the internal production and development momentum of poor areas through industrial projects, helping them to achieve long-term poverty alleviation as soon as possible; at the same time, the company contributes to the work of precise poverty alleviation by providing employment opportunities for poor households, providing scholarships for poor students and providing condolence assistance for the elderly, the weak, the sick, and the disabled.QualityIn the product development stage, we fully identify customer needs and strictly comply with the product development process; meanwhile, we need to complete sample alignment and customer special requirements for full verification before release. In the production operation process, the company strictly implements the enterprise job operation specification and quality assessment system and continuously improves the quality management system through annual internal audit, external audit, and management review to ensure the adequacy and effectiveness of the company’s quality management system operation.Environmental protection(Company) carries out energy and environmental management in strict accordance with the requirements of the Environmental Protection Law of the People’s Republic of China, the Water Pollution Prevention and Control Law of the People’s Republic of China, and other regulations, implements the environmental impact assessment and the three simultaneous systems, and implements environmental audits in strict accordance with the requirements of the competent authorities and obtains corresponding environmental assessment approvals and discharge permits as required.InnovationAll technological innovations ultimately serve people’s lives. The original intention of (company) to build a first-class domestic and overseas technological innovation system is to provide consumers with abundant and healthy products and at the same time to provide a strong guarantee for product quality and safety. It is the company’s original intention to provide consumers with the most sincere products by continuously gathering the power of science and technology and always practicing conscientious enterprise.According to the obtained content validity test fragment, we can see that the selected seed word sets are highly relevant to the topic studied in this paper and present good content validity.


### 5.2. Convergent Validity Test

Aggregation validity test is the empirical test that the seed words selected from five dimensions can reflect their expected effects. This article selects 100 Chinese A-share listed companies as the target companies. Terms like “staff training” and “training,” “safe” and “mechanical maintenance fees,” “poverty” and “public welfare fund,” “quality” and “customer satisfaction,” “environmental protection” and “green budget,” and “innovation” and “r&d” are aggregated to conduct significance test.As we can see from Table5, the correlation coefficients obtained from the validity test are all positive, and the correlations of the word pairs all show a good level of significance, which indicates that the word frequencies of the five-dimensional seed word sets of CSR reports selected in this paper can reliably represent the direction of the company’s financial expenditures and business activities.Table 5
Aggregate validity test.
TrainingSecurity managementPrecise poverty alleviationQualityEnvironmental protectionTechnology innovationStaff training0.0072∗∗∗Security0.0056∗∗∗Poverty alleviation0.0301∗∗Quality0.0041∗∗∗Environmental protection0.0199∗∗Innovation0.0103∗∗YEARControlControlControlControlControlControlINDUSTRYControlControlControlControlControlControlNote:∗, ∗∗, and ∗∗∗ indicate significance at the 10%, 5%, and 1% levels, respectively.


### 5.3. Distinct Validity Test

The differentiated validity test is mainly used for multidimensional index tests, and the correlation coefficients between the selected seed words are used to verify that there is no significant correlation between the seed words of the five dimensions, so as to illustrate the reasonableness of the dimensional selection of the seed word set. The results of the test for the differentiation validity are shown in Table6.Table 6
Correlation coefficients of the explanatory variables.
VariablesCOECSRPYCSRNEVERCSRQuaCSRQua1CSRQua2CSRQua3CSRQua4CSRQua5COE1.00CSR−0.0955∗1.00FYCSR−0.1401∗∗0.2331∗∗∗1.00NEVER0.0612∗∗∗−0.8521∗∗∗−0.2715∗∗∗1.00CSRQua−0.4698∗∗∗0.3328∗∗∗0.0994∗∗∗−0.2637∗∗∗1.00CSRQua1−0.5294∗∗∗0.4019∗∗∗0.1841∗∗∗−0.3185∗∗∗0.8890∗∗∗1.00CSRQua2−0.1073∗∗∗0.1291∗∗∗0.0438∗∗∗−0.0617∗∗∗0.3718∗∗∗0.2771∗∗∗1.00CSRQua3−0.39400.1215∗∗∗0.305∗∗∗−0.1096∗∗∗0.1603∗∗∗0.1821∗∗∗−0.0082∗∗∗1.00CSRQua4−0.0305∗∗∗−0.0355∗∗∗−0.0262∗∗∗−0.0300∗∗∗0.0358∗∗∗0.0308∗∗∗0.0118∗∗∗0.1980∗∗∗1.00CSRQua5−0.1749∗∗∗0.2025∗∗∗−0.0528∗∗∗−0.1735∗∗∗0.4504∗∗∗0.3115∗∗∗0.0520∗∗∗−0.0495∗∗∗−0.0723∗∗∗1.00Note:∗, ∗∗, and ∗∗∗ indicate significance at the 10%, 5%, and 1% levels, respectively.In terms of the correlation coefficients of the explanatory variables, most of the explanatory variables have small correlation coefficients with each other, with only the correlation coefficient betweenNever andCSR being higher than the threshold value of 0.8. This result is in line with our common sense and the discriminant validity test result is good. Further, the correlation coefficients between the variables of issuing social responsibility reports CSRi,t, first issuance of social responsibility reports FYCSRi,t, and quality of social responsibility reports CSRQuai,t and COE are positive and significant at the 10%, 5%, and 1% levels, respectively, which tentatively confirm the hypothesis of this paper. Among the subdivisions of social responsibility report quality, shareholder responsibility, supplier responsibility, environmental responsibility, and philanthropic responsibility are all significantly and negatively correlated with cost of equity capital, which is basically consistent with the results of descriptive statistics.From Table7, we find that the relationship between the remaining control variables and the cost of debt capital is also generally consistent with the findings of existing studies. Also the maximum correlation coefficient between the remaining control variables is 0.62, less than the threshold value of 0.80, indicating that there is no significant cointegration problem between the variables and the discriminant validity test results are good.Table 7
Correlation coefficients of the remaining control variables.
VariablesSIZELEVCFATLROABMAGESIZE1.00LEV0.2286∗∗∗1.00CF−0.0342∗∗∗−0.0159∗∗∗1.00TL0.1433∗∗∗−0.0666∗∗∗0.2004∗∗∗1.00ROA0.1502∗∗−0.1558∗∗∗0.2875∗∗∗0.1975∗∗∗1.00BM0.6257∗0.0829∗∗∗−0.1104∗∗∗−0.3828∗∗∗0.0508∗∗∗1.00AGE0.3625∗∗∗0.1743∗∗∗−0.0179∗∗∗−0.10892∗∗∗0.1684∗∗∗0.4573∗∗∗1.00Note:∗, ∗∗, and ∗∗∗ indicate significance at the 10%, 5%, and 1% levels, respectively.


### 5.4. Time Stability, Reliability, and Mobility Tests

The persistence test examines the correlation coefficients of the five-dimensional seed word sets for each year. Since the business management activities of the same company do not change significantly in a short time span, the data in yeart should show a significantly positive correlation coefficient with the data in year t−i. The higher and more significant the correlation coefficient is, the more stable the indicator is. The results of the test are shown below.From Table8, we can see that the decay rate of the time correlation of all the word sets is slow, except for “quality.” The five-year correlation of the rest of the word sets is still as high as about 0.5, showing a good time stability, while the instability of the word “quality” may be related to the importance the country has attached to product quality in recent years.Table 8
Time stability test results.
Variables in yeartYeart − 1Yeart − 2Yeart − 3Yeart − 4Yeart − 5Staff training0.49600.40480.40850.39930.4349Security0.66720.65570.58670.73390.7256Poverty alleviation0.69340.56830.61580.67760.6669Quality0.33220.27190.33590.29330.2757Environmental protection0.40990.40560.39780.41610.3450Innovation0.40970.34030.34540.33180.3490


### 5.5. Descriptive Statistical Analysis

In this section, descriptive statistical analyses were conducted for all explanatory variables and the results are shown in Table9.Table 9
Descriptive statistical analysis of the main variables.
VariablesSample sizeAverage valueStandard deviationMinimum value25% quartileMedian75th percentileMaximum valueCOE1030.16810.13810.01290.07800.13360.20800.9222SIZE10322.80501.675118.334521.774922.430323.612629.1281LEV1031.63492.03290.07330.43830.95532.019114.3226CFA1030.02150.0767−0.2566−0.00860.01430.03010.3343TL10313.412716.04072.41005.53007.500014.8650101.4000ROA103−0.01010.1803−1.46130.00600.03040.05450.1208BM1030.65630.29100.05920.43780.64260.84641.2356AGE10318.84477.639910.000011.000022.000026.000030.0000CSR1030.37860.48740.00000.00000.00001.00001.0000FYCSR1030.05830.23540.00000.00000.00000.00001.0000NEVER1030.54370.50050.00000.00001.00001.00001.0000CSRQua1030.19220.1121-0.04390.13060.21550.26800.4175CSRQua11030.11550.0739-0.03310.07770.12740.16990.2456CSRQua21030.02350.01210.00030.01330.02220.03190.0400CSRQua31030.02200.0118-0.03940.01540.02220.02960.0397CSRQua41030.02220.00720.01020.01610.02100.02910.0350CSRQua51030.06970.1347-0.10000.00870.04740.09820.9570From the descriptive statistics of the main variables shown in Table10, the cost of equity capital of the sample companies is distributed in the range of 5.01% to 53.01%, with a mean value of 16.81% and a standard deviation of 0.1381, indicating that the cost of equity capital varies widely among companies and is higher than the level of bank loan interest rates in the same period, which is also consistent with the theory of investors’ risk-reward. The mean value of the variable FYCSR is 0.0583; that is, the companies that publish social responsibility reports for the first time account for 5.83% of the total sample. The minimum value of the social responsibility report quality score is −0.0439 and the maximum value is 0.4175, which indicates that the quality of social responsibility information varies widely among companies, and the negative value is mainly caused by a loss in the profitability indicator of the shareholder responsibility score in the social responsibility report. The mean value of the social responsibility report quality score is 0.1922, which indicates that the overall level of social responsibility report quality of listed companies in China is relatively low. After analyzing the subdivision responsibility scores, it can be found that the scores of shareholders’ responsibility, employees’ responsibility, and charity responsibility are relatively evenly distributed in each point, while the two items of suppliers’ responsibility and environmental responsibility are mainly concentrated in the 75th subdivision, which indicates that listed companies pay more attention to shareholders’ responsibility, employees’ responsibility, and charity responsibility and not enough attention to suppliers’ responsibility and environmental responsibility.Table 10
Regression results for hypothesis H2.
VariablesFYCSRNEVERSIZELEVCFATLROABMAGECOE−0.0571−0.0264−0.0031−0.00430.0941−0.0008−0.49940.0646−0.0028The descriptive statistics of the control variables show that company size is 22.8050, on average, slightly above the median 22.4303; the mean values of the equity ratio and tangible asset debt ratio are 1.6349 and 13.4127, respectively, indicating a strong overall solvency and cash solvency (the mean value of the cash flow ratio is 2.15%); the book-to-market ratio is 65.63%, indicating a strong profitability and a low level of risk; and the average number of years a company has been listed is 18.84 years.


### 5.6. Multiple Regression Analysis

To test hypothesis H1, this paper uses explanatory variablesCSRi,t and multivariate statistical regressions controlling OLS for industry and year effects are conducted based on model (1), and the results are shown in Table 11.Table 11
Regression results for hypothesis H1.
VariablesCSRSIZELEVCFATLROABMAGECOE−0.07400.0022−0.00440.0876−0.0011−0.49380.0503−0.0030From the above table, we can see that the regression coefficient ofCSRi,t is −0.0740, which fully illustrates the positive effect of corporate release of responsibility reports on reducing the cost of equity capital of enterprises. Meanwhile, the coefficients of the other control variables are also more reasonable, which corroborates the validity of the model to a certain extent. Thus, hypothesis H1 is verified; that is, with all other things being equal, corporate publication of social responsibility reports can reduce the cost of equity capital by 7.40%.The development of equity financing is the top priority of market-oriented resource allocation and the main grasp of China’s innovation-driven social development. Equity financing can not only enhance the financing efficiency of enterprises and broaden financing channels but also diversify the financial risks of enterprises. In recent years, the reform of China’s stock market system has been continuously promoted, the efficiency of resource allocation has been continuously improved, and the development momentum of equity financing has been generally positive.First, the scale of the stock market has grown significantly. From the perspective of market capitalization scale, as of the end of the year 2020, the total market capitalization of our country’s 4140 listed companies was 86.83 trillion yuan, up 31.94% from the end of the previous year, and has become the second largest market in the world in terms of market capitalization scale. In terms of financing scale, the total amount of equity financing in China in 2020 was 1.67 trillion yuan, with a year-on-year growth of 8.20% and an increase of more than 22 times compared with 2002. Second, the stock market level is more abundant. From the perspective of listed boards, by the end of the year 2020, the number of listed companies on the main board accounted for about half of the total number of listed companies; the numbers of listed companies on the Small and Medium-sized Board, the Growth Enterprise Market, and the Science and Technology Innovation Board accounted for 24.01%, 21.55%, and 5.19% of the total number of listed companies, respectively. Third, the structure of equity financing has been optimized. With the opening of the registration system reform, the internal structure of equity financing has been optimized.Considering the huge volume of equity capital of Chinese enterprises, a decrease, 7.40, of one percentage point in the cost of equity capital is of great economic importance at both the micro and macro levels.To test hypothesis H2, OLS regression controlling industry and year effects was performed on the model using explanatory variableFYCSRi,t, and the results are shown in Table 10.From the above table, the regression coefficient of variableFYCSRi,t to COE is −0.0571, which is significant at the 5% level. Hypothesis H2 is verified by this, indicating that there is indeed a “first effect” in CSR reports issued by enterprises; that is, because the first disclosure can better reflect the qualitative leap of corporate social responsibility, it has a more significant effect on reducing the cost of equity capital of enterprises The first-time disclosure has a more significant effect on reducing the cost of equity capital. Specifically, the first-time disclosure of corporate responsibility report can reduce the cost of equity capital by 5.71%.To test hypothesis H3, this paper conducted a full-sample mixed regression test controlling for industry and year effects on the relationship between the quality of social responsibility reports and the cost of equity capital using a sample of observations from the 2020 annual release of social responsibility reports, and the results are shown in Table12.Table 12
Regression results for hypothesis H3.
VariablesCSRQuaCSRQua1CSRQua2CSRQua3CSRQua4CSRQua5SIZELEVCFATLROABMAGECOE−0.0689−0.6568−0.4016−1.43140.3300−0.00280.0118−0.00940.2048−0.0006−0.35790.0369−0.0023From the above table, the regression coefficient of totalCSRQuai,t score on equity capital cost COE is −0.0689, which is significant at the 5% level, thus verifying hypothesis H3. Specifically, the cost of equity capital can be reduced by 6.89% when the quality of social responsibility reporting is improved by 1 percentage point. Further observation of the regression results for each subresponsibility score reveals that the impact of supplier and shareholder responsibility report scores on the cost of equity capital is significant with coefficients of −0.4016 and −0.3300, respectively, and significant at the 10% level. This result may be due to the fact that these two reports reflect the level of supply chain management and corporate governance of the company, respectively, and are highly correlated with the return on investment.


## 5.1. Content Validity

Content effectiveness refers to the matching degree between the measurement content and the measurement target, as well as the degree of measurement effectiveness.In order to verify the content validity of this study, we replace the selected seed word set into the selected CSR report, retrieve their sentences, and combine them with the context to verify the correlation between the seed word set and social responsibility. See Table4.Table 4
Examples of content validity test sections.
Staff training(Company) has always paid attention to staff training; in the training mode, the company adopts a combination of internal training and external training, “online + offline” way, strengthens the training of conventional business and professional skills, in strict accordance with the relevant national regulations, to ensure the follow-up of staff business level, through the normal training management. We provide more colorful training programs for employees through independent training platform, special training, and lectures and carry out talent training and cultivation in different categories for management talents, professional and technical talents, and new employees, so as to consolidate the construction of talent echelon.Security(Company) has established an emergency handling process for product safety accidents to ensure that the company can be properly handled in a timely manner in the event of a product quality event, accident, occupational health and safety accident, business accident, environmental accident, or other emergencies in the course of production and operation.Poverty alleviation(Company) actively participates in the national cause of precise poverty alleviation and continues to enhance the internal production and development momentum of poor areas through industrial projects, helping them to achieve long-term poverty alleviation as soon as possible; at the same time, the company contributes to the work of precise poverty alleviation by providing employment opportunities for poor households, providing scholarships for poor students and providing condolence assistance for the elderly, the weak, the sick, and the disabled.QualityIn the product development stage, we fully identify customer needs and strictly comply with the product development process; meanwhile, we need to complete sample alignment and customer special requirements for full verification before release. In the production operation process, the company strictly implements the enterprise job operation specification and quality assessment system and continuously improves the quality management system through annual internal audit, external audit, and management review to ensure the adequacy and effectiveness of the company’s quality management system operation.Environmental protection(Company) carries out energy and environmental management in strict accordance with the requirements of the Environmental Protection Law of the People’s Republic of China, the Water Pollution Prevention and Control Law of the People’s Republic of China, and other regulations, implements the environmental impact assessment and the three simultaneous systems, and implements environmental audits in strict accordance with the requirements of the competent authorities and obtains corresponding environmental assessment approvals and discharge permits as required.InnovationAll technological innovations ultimately serve people’s lives. The original intention of (company) to build a first-class domestic and overseas technological innovation system is to provide consumers with abundant and healthy products and at the same time to provide a strong guarantee for product quality and safety. It is the company’s original intention to provide consumers with the most sincere products by continuously gathering the power of science and technology and always practicing conscientious enterprise.According to the obtained content validity test fragment, we can see that the selected seed word sets are highly relevant to the topic studied in this paper and present good content validity.


## 5.2. Convergent Validity Test

Aggregation validity test is the empirical test that the seed words selected from five dimensions can reflect their expected effects. This article selects 100 Chinese A-share listed companies as the target companies. Terms like “staff training” and “training,” “safe” and “mechanical maintenance fees,” “poverty” and “public welfare fund,” “quality” and “customer satisfaction,” “environmental protection” and “green budget,” and “innovation” and “r&d” are aggregated to conduct significance test.As we can see from Table5, the correlation coefficients obtained from the validity test are all positive, and the correlations of the word pairs all show a good level of significance, which indicates that the word frequencies of the five-dimensional seed word sets of CSR reports selected in this paper can reliably represent the direction of the company’s financial expenditures and business activities.Table 5
Aggregate validity test.
TrainingSecurity managementPrecise poverty alleviationQualityEnvironmental protectionTechnology innovationStaff training0.0072∗∗∗Security0.0056∗∗∗Poverty alleviation0.0301∗∗Quality0.0041∗∗∗Environmental protection0.0199∗∗Innovation0.0103∗∗YEARControlControlControlControlControlControlINDUSTRYControlControlControlControlControlControlNote:∗, ∗∗, and ∗∗∗ indicate significance at the 10%, 5%, and 1% levels, respectively.


## 5.3. Distinct Validity Test

The differentiated validity test is mainly used for multidimensional index tests, and the correlation coefficients between the selected seed words are used to verify that there is no significant correlation between the seed words of the five dimensions, so as to illustrate the reasonableness of the dimensional selection of the seed word set. The results of the test for the differentiation validity are shown in Table6.Table 6
Correlation coefficients of the explanatory variables.
VariablesCOECSRPYCSRNEVERCSRQuaCSRQua1CSRQua2CSRQua3CSRQua4CSRQua5COE1.00CSR−0.0955∗1.00FYCSR−0.1401∗∗0.2331∗∗∗1.00NEVER0.0612∗∗∗−0.8521∗∗∗−0.2715∗∗∗1.00CSRQua−0.4698∗∗∗0.3328∗∗∗0.0994∗∗∗−0.2637∗∗∗1.00CSRQua1−0.5294∗∗∗0.4019∗∗∗0.1841∗∗∗−0.3185∗∗∗0.8890∗∗∗1.00CSRQua2−0.1073∗∗∗0.1291∗∗∗0.0438∗∗∗−0.0617∗∗∗0.3718∗∗∗0.2771∗∗∗1.00CSRQua3−0.39400.1215∗∗∗0.305∗∗∗−0.1096∗∗∗0.1603∗∗∗0.1821∗∗∗−0.0082∗∗∗1.00CSRQua4−0.0305∗∗∗−0.0355∗∗∗−0.0262∗∗∗−0.0300∗∗∗0.0358∗∗∗0.0308∗∗∗0.0118∗∗∗0.1980∗∗∗1.00CSRQua5−0.1749∗∗∗0.2025∗∗∗−0.0528∗∗∗−0.1735∗∗∗0.4504∗∗∗0.3115∗∗∗0.0520∗∗∗−0.0495∗∗∗−0.0723∗∗∗1.00Note:∗, ∗∗, and ∗∗∗ indicate significance at the 10%, 5%, and 1% levels, respectively.In terms of the correlation coefficients of the explanatory variables, most of the explanatory variables have small correlation coefficients with each other, with only the correlation coefficient betweenNever andCSR being higher than the threshold value of 0.8. This result is in line with our common sense and the discriminant validity test result is good. Further, the correlation coefficients between the variables of issuing social responsibility reports CSRi,t, first issuance of social responsibility reports FYCSRi,t, and quality of social responsibility reports CSRQuai,t and COE are positive and significant at the 10%, 5%, and 1% levels, respectively, which tentatively confirm the hypothesis of this paper. Among the subdivisions of social responsibility report quality, shareholder responsibility, supplier responsibility, environmental responsibility, and philanthropic responsibility are all significantly and negatively correlated with cost of equity capital, which is basically consistent with the results of descriptive statistics.From Table7, we find that the relationship between the remaining control variables and the cost of debt capital is also generally consistent with the findings of existing studies. Also the maximum correlation coefficient between the remaining control variables is 0.62, less than the threshold value of 0.80, indicating that there is no significant cointegration problem between the variables and the discriminant validity test results are good.Table 7
Correlation coefficients of the remaining control variables.
VariablesSIZELEVCFATLROABMAGESIZE1.00LEV0.2286∗∗∗1.00CF−0.0342∗∗∗−0.0159∗∗∗1.00TL0.1433∗∗∗−0.0666∗∗∗0.2004∗∗∗1.00ROA0.1502∗∗−0.1558∗∗∗0.2875∗∗∗0.1975∗∗∗1.00BM0.6257∗0.0829∗∗∗−0.1104∗∗∗−0.3828∗∗∗0.0508∗∗∗1.00AGE0.3625∗∗∗0.1743∗∗∗−0.0179∗∗∗−0.10892∗∗∗0.1684∗∗∗0.4573∗∗∗1.00Note:∗, ∗∗, and ∗∗∗ indicate significance at the 10%, 5%, and 1% levels, respectively.


## 5.4. Time Stability, Reliability, and Mobility Tests

The persistence test examines the correlation coefficients of the five-dimensional seed word sets for each year. Since the business management activities of the same company do not change significantly in a short time span, the data in yeart should show a significantly positive correlation coefficient with the data in year t−i. The higher and more significant the correlation coefficient is, the more stable the indicator is. The results of the test are shown below.From Table8, we can see that the decay rate of the time correlation of all the word sets is slow, except for “quality.” The five-year correlation of the rest of the word sets is still as high as about 0.5, showing a good time stability, while the instability of the word “quality” may be related to the importance the country has attached to product quality in recent years.Table 8
Time stability test results.
Variables in yeartYeart − 1Yeart − 2Yeart − 3Yeart − 4Yeart − 5Staff training0.49600.40480.40850.39930.4349Security0.66720.65570.58670.73390.7256Poverty alleviation0.69340.56830.61580.67760.6669Quality0.33220.27190.33590.29330.2757Environmental protection0.40990.40560.39780.41610.3450Innovation0.40970.34030.34540.33180.3490


## 5.5. Descriptive Statistical Analysis

In this section, descriptive statistical analyses were conducted for all explanatory variables and the results are shown in Table9.Table 9
Descriptive statistical analysis of the main variables.
VariablesSample sizeAverage valueStandard deviationMinimum value25% quartileMedian75th percentileMaximum valueCOE1030.16810.13810.01290.07800.13360.20800.9222SIZE10322.80501.675118.334521.774922.430323.612629.1281LEV1031.63492.03290.07330.43830.95532.019114.3226CFA1030.02150.0767−0.2566−0.00860.01430.03010.3343TL10313.412716.04072.41005.53007.500014.8650101.4000ROA103−0.01010.1803−1.46130.00600.03040.05450.1208BM1030.65630.29100.05920.43780.64260.84641.2356AGE10318.84477.639910.000011.000022.000026.000030.0000CSR1030.37860.48740.00000.00000.00001.00001.0000FYCSR1030.05830.23540.00000.00000.00000.00001.0000NEVER1030.54370.50050.00000.00001.00001.00001.0000CSRQua1030.19220.1121-0.04390.13060.21550.26800.4175CSRQua11030.11550.0739-0.03310.07770.12740.16990.2456CSRQua21030.02350.01210.00030.01330.02220.03190.0400CSRQua31030.02200.0118-0.03940.01540.02220.02960.0397CSRQua41030.02220.00720.01020.01610.02100.02910.0350CSRQua51030.06970.1347-0.10000.00870.04740.09820.9570From the descriptive statistics of the main variables shown in Table10, the cost of equity capital of the sample companies is distributed in the range of 5.01% to 53.01%, with a mean value of 16.81% and a standard deviation of 0.1381, indicating that the cost of equity capital varies widely among companies and is higher than the level of bank loan interest rates in the same period, which is also consistent with the theory of investors’ risk-reward. The mean value of the variable FYCSR is 0.0583; that is, the companies that publish social responsibility reports for the first time account for 5.83% of the total sample. The minimum value of the social responsibility report quality score is −0.0439 and the maximum value is 0.4175, which indicates that the quality of social responsibility information varies widely among companies, and the negative value is mainly caused by a loss in the profitability indicator of the shareholder responsibility score in the social responsibility report. The mean value of the social responsibility report quality score is 0.1922, which indicates that the overall level of social responsibility report quality of listed companies in China is relatively low. After analyzing the subdivision responsibility scores, it can be found that the scores of shareholders’ responsibility, employees’ responsibility, and charity responsibility are relatively evenly distributed in each point, while the two items of suppliers’ responsibility and environmental responsibility are mainly concentrated in the 75th subdivision, which indicates that listed companies pay more attention to shareholders’ responsibility, employees’ responsibility, and charity responsibility and not enough attention to suppliers’ responsibility and environmental responsibility.Table 10
Regression results for hypothesis H2.
VariablesFYCSRNEVERSIZELEVCFATLROABMAGECOE−0.0571−0.0264−0.0031−0.00430.0941−0.0008−0.49940.0646−0.0028The descriptive statistics of the control variables show that company size is 22.8050, on average, slightly above the median 22.4303; the mean values of the equity ratio and tangible asset debt ratio are 1.6349 and 13.4127, respectively, indicating a strong overall solvency and cash solvency (the mean value of the cash flow ratio is 2.15%); the book-to-market ratio is 65.63%, indicating a strong profitability and a low level of risk; and the average number of years a company has been listed is 18.84 years.


## 5.6. Multiple Regression Analysis

To test hypothesis H1, this paper uses explanatory variablesCSRi,t and multivariate statistical regressions controlling OLS for industry and year effects are conducted based on model (1), and the results are shown in Table 11.Table 11
Regression results for hypothesis H1.
VariablesCSRSIZELEVCFATLROABMAGECOE−0.07400.0022−0.00440.0876−0.0011−0.49380.0503−0.0030From the above table, we can see that the regression coefficient ofCSRi,t is −0.0740, which fully illustrates the positive effect of corporate release of responsibility reports on reducing the cost of equity capital of enterprises. Meanwhile, the coefficients of the other control variables are also more reasonable, which corroborates the validity of the model to a certain extent. Thus, hypothesis H1 is verified; that is, with all other things being equal, corporate publication of social responsibility reports can reduce the cost of equity capital by 7.40%.The development of equity financing is the top priority of market-oriented resource allocation and the main grasp of China’s innovation-driven social development. Equity financing can not only enhance the financing efficiency of enterprises and broaden financing channels but also diversify the financial risks of enterprises. In recent years, the reform of China’s stock market system has been continuously promoted, the efficiency of resource allocation has been continuously improved, and the development momentum of equity financing has been generally positive.First, the scale of the stock market has grown significantly. From the perspective of market capitalization scale, as of the end of the year 2020, the total market capitalization of our country’s 4140 listed companies was 86.83 trillion yuan, up 31.94% from the end of the previous year, and has become the second largest market in the world in terms of market capitalization scale. In terms of financing scale, the total amount of equity financing in China in 2020 was 1.67 trillion yuan, with a year-on-year growth of 8.20% and an increase of more than 22 times compared with 2002. Second, the stock market level is more abundant. From the perspective of listed boards, by the end of the year 2020, the number of listed companies on the main board accounted for about half of the total number of listed companies; the numbers of listed companies on the Small and Medium-sized Board, the Growth Enterprise Market, and the Science and Technology Innovation Board accounted for 24.01%, 21.55%, and 5.19% of the total number of listed companies, respectively. Third, the structure of equity financing has been optimized. With the opening of the registration system reform, the internal structure of equity financing has been optimized.Considering the huge volume of equity capital of Chinese enterprises, a decrease, 7.40, of one percentage point in the cost of equity capital is of great economic importance at both the micro and macro levels.To test hypothesis H2, OLS regression controlling industry and year effects was performed on the model using explanatory variableFYCSRi,t, and the results are shown in Table 10.From the above table, the regression coefficient of variableFYCSRi,t to COE is −0.0571, which is significant at the 5% level. Hypothesis H2 is verified by this, indicating that there is indeed a “first effect” in CSR reports issued by enterprises; that is, because the first disclosure can better reflect the qualitative leap of corporate social responsibility, it has a more significant effect on reducing the cost of equity capital of enterprises The first-time disclosure has a more significant effect on reducing the cost of equity capital. Specifically, the first-time disclosure of corporate responsibility report can reduce the cost of equity capital by 5.71%.To test hypothesis H3, this paper conducted a full-sample mixed regression test controlling for industry and year effects on the relationship between the quality of social responsibility reports and the cost of equity capital using a sample of observations from the 2020 annual release of social responsibility reports, and the results are shown in Table12.Table 12
Regression results for hypothesis H3.
VariablesCSRQuaCSRQua1CSRQua2CSRQua3CSRQua4CSRQua5SIZELEVCFATLROABMAGECOE−0.0689−0.6568−0.4016−1.43140.3300−0.00280.0118−0.00940.2048−0.0006−0.35790.0369−0.0023From the above table, the regression coefficient of totalCSRQuai,t score on equity capital cost COE is −0.0689, which is significant at the 5% level, thus verifying hypothesis H3. Specifically, the cost of equity capital can be reduced by 6.89% when the quality of social responsibility reporting is improved by 1 percentage point. Further observation of the regression results for each subresponsibility score reveals that the impact of supplier and shareholder responsibility report scores on the cost of equity capital is significant with coefficients of −0.4016 and −0.3300, respectively, and significant at the 10% level. This result may be due to the fact that these two reports reflect the level of supply chain management and corporate governance of the company, respectively, and are highly correlated with the return on investment.


## 6. Research Findings and Insights

### 6.1. Research Findings

Taking corporate social responsibility report and equity capital as the research object, this paper analyzes the construction of algorithm model based on Intelligent Computing, discusses the publication of social responsibility report and the relationship between its characteristics and the cost of equity capital, explains the benefits and motivation of corporate social responsibility report to a certain extent, and provides a certain theoretical reference for the regulatory activities of regulatory authorities.In this paper, the relationship between social responsibility reports and the cost of equity capital of companies is analyzed theoretically and tested empirically with the sample of A-share listed companies in China from year 2016 to year 2020. The main findings of the study are as follows: (1) the publication of social responsibility reports by listed companies helps reduce the cost of equity capital and has a significant “first disclosure” effect; that is, companies that publish social responsibility reports for the first time can obtain a lower cost of equity capital compared with companies that do not publish social responsibility reports for the first time; (2) the publication of social responsibility reports has a more significant negative effect on the cost of equity capital of A-share listed companies that publish social responsibility reports for the first time; (3) the higher the quality of social responsibility reports published by listed companies, the lower their cost of equity capital, especially the quality of supplier and shareholder responsibility reports, which has a more significant negative effect on the cost of equity capital.


### 6.2. Theoretical Insights and Policy Recommendations

First, the significant negative relationship between social responsibility reporting and the cost of equity capital helps to motivate more companies to issue social responsibility reports. The results of this study suggest that companies are not motivated to publish social responsibility reports only by compliance with regulations and external pressure from stakeholders but also by intrinsic interests and profit-seeking nature.In addition, there are still two problems with the social responsibility disclosure of enterprises in China: first, the overall level of social responsibility report quality is still low; second, most enterprises’ awareness of social responsibility reports is still at a preliminary stage; that is, they think that as long as they publish social responsibility reports, it is a qualitative leap forward, and they do not care much about the content and quality of the reports. Therefore, regulators should standardize the format and content of social responsibility reports, while enterprises should establish social responsibility awareness and improve the quality of social responsibility reports.


## 6.1. Research Findings

Taking corporate social responsibility report and equity capital as the research object, this paper analyzes the construction of algorithm model based on Intelligent Computing, discusses the publication of social responsibility report and the relationship between its characteristics and the cost of equity capital, explains the benefits and motivation of corporate social responsibility report to a certain extent, and provides a certain theoretical reference for the regulatory activities of regulatory authorities.In this paper, the relationship between social responsibility reports and the cost of equity capital of companies is analyzed theoretically and tested empirically with the sample of A-share listed companies in China from year 2016 to year 2020. The main findings of the study are as follows: (1) the publication of social responsibility reports by listed companies helps reduce the cost of equity capital and has a significant “first disclosure” effect; that is, companies that publish social responsibility reports for the first time can obtain a lower cost of equity capital compared with companies that do not publish social responsibility reports for the first time; (2) the publication of social responsibility reports has a more significant negative effect on the cost of equity capital of A-share listed companies that publish social responsibility reports for the first time; (3) the higher the quality of social responsibility reports published by listed companies, the lower their cost of equity capital, especially the quality of supplier and shareholder responsibility reports, which has a more significant negative effect on the cost of equity capital.


## 6.2. Theoretical Insights and Policy Recommendations

First, the significant negative relationship between social responsibility reporting and the cost of equity capital helps to motivate more companies to issue social responsibility reports. The results of this study suggest that companies are not motivated to publish social responsibility reports only by compliance with regulations and external pressure from stakeholders but also by intrinsic interests and profit-seeking nature.In addition, there are still two problems with the social responsibility disclosure of enterprises in China: first, the overall level of social responsibility report quality is still low; second, most enterprises’ awareness of social responsibility reports is still at a preliminary stage; that is, they think that as long as they publish social responsibility reports, it is a qualitative leap forward, and they do not care much about the content and quality of the reports. Therefore, regulators should standardize the format and content of social responsibility reports, while enterprises should establish social responsibility awareness and improve the quality of social responsibility reports.



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*Source: 3306735-2022-06-23.xml*