Study Overview
The study investigates the real effects of Section 1502 of the Dodd–Frank Act, which mandates U.S. public companies to disclose the use of conflict minerals (3TG: tantalum, tin, tungsten, gold) sourced from the Democratic Republic of the Congo (DRC) and neighboring countries. The key research questions are: Does public scrutiny of firms' conflict mineral disclosures (CMDs) lead to more responsible sourcing practices? Does increased responsible sourcing reduce conflict in mineral-rich regions of the DRC and surrounding countries? The authors use firm-level CMD data (2014–2018), EDGAR download logs, and smelter certification data to measure public attention and responsible sourcing. They apply a difference-in-difference-in-differences (DDD) design using geo-coded data on African conflicts to identify changes in conflict intensity in mining vs. non-mining areas, in covered vs. non-covered countries, before and after 2014. The study also incorporates smelter-level analysis and cross-sectional tests using institutional quality and mineral types.
Study Results
Consistent with the reputational cost hypothesis, the study finds heightened public attention to CMDs increases responsible sourcing. After Section 1502 takes effect, the study shows higher demand for 3TG products processed in certified smelters, decreased conflicts in covered countries’ mining regions relative to other regions, and reduced sensitivity of conflict risk to conflict minerals’ price spikes. Finally, the study find that conflicts decrease in Eastern DRC territories with prevalent 3T (tantalum, tin, and tungsten) mines but increase in territories with prevalent gold mines. Overall, the findings highlight the real effects of enhanced supply chain transparency regulation.
News & media
The Real Effects of Conflict Minerals Disclosures
September 22, 2021
Our study answers Christensen et al. (2021)’s call for more research on the consequences of environmental, social and governance (ESG) reporting. We show that CMDs affect stakeholders beyond traditional investors. More broadly, we extend the literature on disclosures’ real effects by identifying how companies make decisions in response to information revealed in non-financial disclosures that may influence non-financial stakeholders (e.g., consumers, suppliers, and communities that are adversely affected by corporations’ upstream operations).
How accounting for mineral sourcing lowered violence in Central Africa
January 18, 2022
“It’s easy to ask companies to disclose more,” he adds, “but what’s crucial is to measure the impact the disclosures have. That’s what we, as accountants, are endeavoring to do.”