Corporate Social Responsibility and Corporate Disclosures: An Investigation of Investors’ and Analysts’ Perceptions
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We conjecture that corporate social responsibility (CSR) can be indicative of managerial ethics and integrity and examine whether equity investors and financial analysts consider CSR performance when they assess firms’ disclosures of actual and forecasted earnings. We find that only adverse CSR performance affects investors’ assessments of these disclosures. In contrast, we find that both positive and adverse CSR performance affect analysts’ forecast revisions in response to firms’ disclosures. We also find that firms with adverse CSR performance exhibit lower disclosure quality and earnings persistence, but do not find that firms with positive CSR performance exhibit higher levels of both measures. This asymmetric result is consistent with investors’, but not analysts’, assessments of the effect of CSR performance on corporate disclosures. Our results are robust to using a three-stage least squares approach to address endogeneity concerns and to a battery of robustness and sensitivity analyses. Overall, our findings suggest that investors and analysts consider CSR when assessing the information in earnings-related corporate disclosures.
KeywordsCorporate social responsibility (CSR) Managerial ethics, managerial integrity, stock price changes Analysts’ reaction Corporate disclosures
We thank Senior Editor, Steven Dellaportas, and two anonymous reviewers for their invaluable comments and guidance. We also thank Shuping Chen, Bin Miao, and Terry Shevlin for kindly sharing the data on disclosure quality. We appreciate feedback from Azizul Islam, Sze Kee Koh, Issam Laguil, and conference participants at the 2015 Annual Meeting of the Accounting and Finance Association of Australia and New Zealand. We acknowledge our respective universities for financial support.
One of the authors has received a research grant from ASEAN CSR Network (ASEAN CSR Vision 2020 Small Grant Fund) for this study.
Compliance with Ethical Standards
Conflict of interest
Kevin Koh has received a research grant from ASEAN CSR Network (ASEAN CSR Vision 2020 Small Grant Fund). Audrey Hsu declares that she has no conflict of interest. Sophia Liu declares that she has no conflict of interest. Yen H. Tong declares that he has no conflict of interest.
This article does not contain any studies with human participants or animals performed by any of the authors.
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