Corporate Social Responsibility Report Narratives and Analyst Forecast Accuracy
Standalone corporate social responsibility (CSR) reports vary considerably in the content of information released due to their voluntary nature. In this study, we develop a disclosure score based on the tone, readability, length, and the numerical and horizon content of CSR report narratives, and examine the relationship between the CSR disclosure scores and analyst forecasts. We find that CSR reporters with high disclosure scores are associated with more accurate forecasts, whereas low score CSR reporters are not associated with more accurate forecasts than firms who do not issue CSR reports. The findings are robust to controlling for firm characteristics including CSR activity ratings and financial narratives. The findings are driven by experienced CSR reporters rather than first-time CSR reporters. Together, our findings suggest that the content of CSR reports helps to improve analyst forecast accuracy, and this relationship is more pronounced for CSR reports with more substantial content.
KeywordsCorporate social responsibility reporting Textual disclosures Analyst forecasts
The previous title of this paper was “Measuring Corporate Social Responsibility Report Quality Using Narratives.” We acknowledge the helpful comments of seminar participants at the 2014 AAA annual conference, 2014 Journal of Business Ethics conference, National Taiwan University, Fudan University, University of Exeter, University of Bristol, and Imperial College.
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