The purpose of this paper is to test opposing views of the relationship between corporate social responsibility (CSR) and investment efficiency in a major Asian emerging stock market. The empirical results show that CSR significantly mitigates investment inefficiency among Taiwanese firms. This finding is consistent with the notion that socially responsible Taiwanese firms have fewer agency problems and lower information asymmetry, thus reducing investment inefficiency. The empirical results also show that CSR has a more pronounced effect in mitigating investment inefficiency for Taiwanese firms with more effective corporate governance. In particular, due to the mandatory preparation of CSR reporting, CSR is associated with lower investment inefficiency for Taiwanese firms with weak governance mechanisms during the period 2014–2017. The findings of this paper have implications for government authorities, firm managers, and investors in terms of CSR policy formation, the implementation of CSR programs, and the management of investment portfolios.
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