Corporate Social Responsibility and Corporate Disclosures: An Investigation of Investors’ and Analysts’ Perceptions

  • Audrey Hsu
  • Kevin Koh
  • Sophia Liu
  • Yen H. Tong
Original Paper


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.


Corporate 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.

Ethical Approval

This article does not contain any studies with human participants or animals performed by any of the authors.


  1. Agapova, A., & Madura, J. (2011). Information leakage prior to company issued guidance. Financial Management, 40, 623–646.CrossRefGoogle Scholar
  2. Ahern, K. R. (2009). Sample selection and event study estimation. Journal of Empirical Finance, 16(3), 466–482.CrossRefGoogle Scholar
  3. Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economics Studies, 58(2), 277–297.CrossRefGoogle Scholar
  4. Baltagi, B. H. (2008). Econometric analysis of panel data. West Sussex: Wiley.Google Scholar
  5. Barth, M. E., & Hutton, A. P. (2004). Analyst earnings forecast revisions and the pricing of accruals. Review of Accounting Studies, 9(1), 59–96.CrossRefGoogle Scholar
  6. Bartov, E. & Li, Y. (2015). Corporate social responsibility and the market pricing of corporate earnings. Working Paper, New York: University and National University of Singapore.Google Scholar
  7. Billings, B. K. (1999). Revisiting the relation between the default risk of debt and the earnings response coefficient. The Accounting Review, 74(4), 509–522.CrossRefGoogle Scholar
  8. Campbell, J. L. (2007). Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Academy of Management Review, 32(3), 946–967.CrossRefGoogle Scholar
  9. Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), 39–48.CrossRefGoogle Scholar
  10. Chatterji, A. K., Levine, D. I., & Toffel, M. W. (2009). How well do social ratings actually measure corporate social responsibility? Journal of Economics & Management Strategy, 18(1), 125–169.CrossRefGoogle Scholar
  11. Chen, C., & Delmas, M. (2011). Measuring corporate social performance: An efficiency perspective. Production and Operations Management, 20(6), 789–804.CrossRefGoogle Scholar
  12. Chen, S., & Matsumoto, D. A. (2006). Favorable versus unfavorable recommendations: The impact on analyst access to management-provided information. Journal of Accounting Research, 44, 657–689.CrossRefGoogle Scholar
  13. Chen, S., Miao, B. I. N., & Shevlin, T. (2015). A new measure of disclosure quality: The level of disaggregation of accounting data in annual reports. Journal of Accounting Research, 53(5), 1017–1054.CrossRefGoogle Scholar
  14. Cheung, W. K. A. (2011). Do stock investors value corporate sustainability? Evidence from an event study. Journal of Business Ethics, 99, 145–165.CrossRefGoogle Scholar
  15. Collins, D. W., & Kothari, S. P. (1989). An analysis of intertemporal and cross-sectional determinants of earnings response coefficients. Journal of Accounting and Economics, 11(2–3), 143–181.CrossRefGoogle Scholar
  16. CSR Europe, Deloitte, & Euronext. (2003). Investing in responsible business: The 2003 survey of European fund managers, financial analysts and investor relations officers. Brussels: CSR Europe & Deloitte.Google Scholar
  17. Davis, A. D., Guenther, L. K., & Williams, B. (2015). Do socially responsible firms pay more taxes? The Accounting Review, 91(1), 47–68.CrossRefGoogle Scholar
  18. Donaldson, T., & Preston, L. E. (1995). The stakeholder theory of the corporation: Concepts, evidence, and implications. The Academy of Management Review, 20(1), 65–91.Google Scholar
  19. Ernst & Young. (2014). Let’s talk: Sustainability. A new point of view for business leaders. Retrieved from$FILE/EY%20Let’s%20talk%20sustainability,%202014-04.pdf.
  20. Gao, J., & Bansal, P. (2013). Instrumental and integrative logics in business sustainability. Journal of Business Ethics, 112(2), 241–255.CrossRefGoogle Scholar
  21. Gleason, C., & Lee, C. (2003). Analyst forecast revisions and market price discovery. The Accounting Review, 78(1), 193–225.CrossRefGoogle Scholar
  22. Godfrey, P. C. (2005). The relationship between corporate philanthropy and shareholder wealth: a risk management perspective. Academy of Management Review, 30, 777–798.CrossRefGoogle Scholar
  23. Godos-Díez, J., Fernández-Gago, R., & Martínez-Campillo, A. (2011). How Important Are CEOs to CSR practices? An analysis of the mediating effect of the perceived role of ethics and social responsibility. Journal of Business Ethics, 98(4), 531–548.CrossRefGoogle Scholar
  24. Grullon, G., Michaely, R., & Swaminathan, B. (2002). Are dividend changes a sign of firm maturity? Journal of Business, 75(3), 387–424.CrossRefGoogle Scholar
  25. Guiral, A., Moon, D., & Choi, H. (2014). Can excellence in corporate social performance improve investors’ financial assessments and credibility of managers’ forecasts? Asia-Pacific Journal of Financial Studies, 43(4), 530–555.CrossRefGoogle Scholar
  26. Hemingway, C. A., & Maclagan, P. W. (2004). Managers’ personal values as drivers of corporate social responsibility. Journal of Business Ethics, 50(1), 33–44.CrossRefGoogle Scholar
  27. Hoi, C. K., Wu, Q., & Zhang, H. (2013). Is corporate social responsibility (CSR) associated with tax avoidance? Evidence from irresponsible CSR activities. The Accounting Review, 88(6), 2025–2059.CrossRefGoogle Scholar
  28. Hong, B., Li, Z., & Minor, D. (2016). Corporate governance and executive compensation for corporate social responsibility. Journal of Business Ethics, 136(1), 199–213.CrossRefGoogle Scholar
  29. Hutton, A. P., Lee, L. F., & Shu, S. Z. (2012). Do managers always know better? The relative accuracy of management and analyst forecasts. Journal of Accounting Research, 50, 1217–1244.CrossRefGoogle Scholar
  30. Hutton, A. P., Miller, G. S., & Skinner, D. J. (2003). The role of supplementary statements with management earnings forecasts. Journal of Accounting Research, 41(5), 867–890.CrossRefGoogle Scholar
  31. Ioannou, I., & Serafeim, G. (2015). The impact of corporate social responsibility on investment recommendations: Analysts’ perceptions and shifting institutional logics. Strategic Management Journal, 36(7), 1053–1081.CrossRefGoogle Scholar
  32. Jayachandran, S., Kalaignanam, K., & Eilert, M. (2013). Product and environmental social performance: Varying effect on firm performance. Strategic Management Journal, 34, 1255–1264.CrossRefGoogle Scholar
  33. Jeong, K. H., Jeong, S. W., Lee, W. J., & Bae, S. H. (2016). Permanency of CSR activities and firm value. Journal of Business Ethics. Scholar
  34. Jones, T. M. (1995). Instrumental stakeholder theory: A synthesis of ethics and economics. The Academy of Management Review, 20(2), 404–437.Google Scholar
  35. Ke, B., & Yu, Y. (2006). The Effect of issuing biased earnings forecasts on analysts’ access to management and survival. Journal of Accounting Research, 44(5), 965–999.CrossRefGoogle Scholar
  36. Kempf, A., & Osthoff, P. (2007). The effect of socially responsible investing on portfolio performance. European Financial Management, 13(5), 908–922.CrossRefGoogle Scholar
  37. Khan, M., Serafeim, G., & Yoon, A. (2016). Corporate sustainability: First evidence on materiality. The Accounting Review, 91(6), 1697–1724.CrossRefGoogle Scholar
  38. Kim, Y., Park, M. S., & Wier, B. (2012). Is earnings quality associated with corporate social responsibility? The Accounting Review, 87(3), 761–796.CrossRefGoogle Scholar
  39. Klein, A. (2002). Audit committee, board of director characteristics, and earnings management. Journal of Accounting and Economics, 33(3), 375–400.CrossRefGoogle Scholar
  40. Koh, K., & Tong, Y. H. (2013). The effects of clients’ controversial activities on audit pricing. Auditing Journal of Practice and Theory, 32(2), 67–96.CrossRefGoogle Scholar
  41. Kotchen, M. J., & Moon, J. J. (2012). Corporate social responsibility for irresponsibility. The B.E. Journal of Economic Analysis & Policy, 12(1), 1–21.CrossRefGoogle Scholar
  42. Kothari, S. P., & Sloan, R. G. (1992). Information in prices about future earnings: Implications for earnings response coefficients. Journal of Accounting and Economics, 15(2–3), 143–171.CrossRefGoogle Scholar
  43. Lacy, P., Cooper, T., Hayward, R., & Neuberger, L. (2010). A new era of sustainability: UN Global Compact-Accenture CEO Study study 2010. New York: UN Compact & Accenture.Google Scholar
  44. Lange, D., & Washburn, N. T. (2012). Understanding attributions of corporate social irresponsibility. Academy of Management Review, 37(2), 300–326.CrossRefGoogle Scholar
  45. Lev, B., & Thiagarajan, S. R. (1993). Fundamental information analysis. Journal of Accounting Research, 31(2), 190–215.CrossRefGoogle Scholar
  46. Li, Y., & Zhang, L. (2015). Short selling pressure, stock price behavior, and management forecast precision: Evidence from a natural experiment. Journal of Accounting Research, 53, 79–117.CrossRefGoogle Scholar
  47. Lundholm, R., & Myers, L. A. (2002). Bring the future forward: The effect of disclosure on the returns-earnings relation. Journal of Accounting Research, 40(3), 809–839.CrossRefGoogle Scholar
  48. Luo, X., Wang, H., Raithel, S., & Zheng, Q. (2015). Corporate social performance, analyst stock recommendations, and firm future returns. Strategic Management Journal, 36(1), 123–136.CrossRefGoogle Scholar
  49. Margolis, J. D., & Walsh, J. P. (2003). Misery loves companies: Rethinking social initiatives by business. Administrative Science Quarterly, 48(2), 268–305.CrossRefGoogle Scholar
  50. Mattingly, J. E., & Berman, S. L. (2006). Measurement of corporate social action. Business and Society, 45(1), 20–46.CrossRefGoogle Scholar
  51. McWilliams, A., & Siegel, D. (2000). Corporate social responsibility and financial performance: correlation or misspecification? Strategic Management Journal, 21(5), 603–609.CrossRefGoogle Scholar
  52. McWilliams, A., Siegel, D. S., & Wright, P. M. (2006). Corporate social responsibility: Strategic implications. Journal of Management Studies, 43(1), 1–18.CrossRefGoogle Scholar
  53. Miao, B., & Tong, Y. H. (2011). Are dividends associated with the quality of earnings? Accounting Horizons, 25(1), 183–205.CrossRefGoogle Scholar
  54. Mishina, Y., Block, E. S., & Mannor, M. J. (2012). The path dependence of organizational reputation: how social judgment influences assessments of capability and character. Strategic Management Journal, 33, 459–477.CrossRefGoogle Scholar
  55. Mishra, S., & Modi, S. B. (2016). Corporate social responsibility and shareholder wealth: The role of marketing capability. Journal of Marketing, 80(1), 26–46.CrossRefGoogle Scholar
  56. Ng, J., Tuna, İ., & Verdi, R. (2013). Management forecast credibility and underreaction to news. Review of Accounting Studies, 18, 956.CrossRefGoogle Scholar
  57. Nickell, S. (1981). Biases in dynamic models with fixed effects. Econometrica, 49, 1417–1426.CrossRefGoogle Scholar
  58. Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social and financial performance: A meta-analysis. Organization Studies, 24(3), 403–441.CrossRefGoogle Scholar
  59. Petersen, M. A. (2009). Estimating standard errors in finance panel data sets: Comparing approaches. Review of Financial Studies, 22(1), 435–480.CrossRefGoogle Scholar
  60. Petrovits, C. M. (2006). Corporate-sponsored foundations and earnings management. Journal of Accounting and Economics, 41(3), 335–362.CrossRefGoogle Scholar
  61. Phillips, R., Freeman, R. E., & Wicks, A. C. (2003). What stakeholder theory is not. Business Ethics Quarterly, 13(4), 479–502.CrossRefGoogle Scholar
  62. Ramnath, S., Rock, S., & Shane, P. (2008). The financial analyst forecasting literature: A taxonomy with suggestions for future research. International Journal of Forecasting, 24(1), 34–75.CrossRefGoogle Scholar
  63. Richardson, S., Sloan, R., Soliman, M., & Tuna, I. (2005). Accrual reliability, earnings persistence and stock prices. Journal of Accounting and Economics, 39, 437–485.CrossRefGoogle Scholar
  64. Roman, R. M., Hayibor, S., & Agle, B. R. (1999). The relationship between social and financial performance—repainting a portrait. Business and Society, 38(1), 109–125.CrossRefGoogle Scholar
  65. Schipper, K. (1991). Analysts’ forecasts. Accounting Horizons, 5, 105–131.Google Scholar
  66. Servaes, H., & Tamayo, A. (2013). The impact of corporate social responsibility on firm value: The role of customer awareness. Management Science, 59(5), 1045–1061.CrossRefGoogle Scholar
  67. Shafer, W. E. (2015). Ethical climate, social responsibility, and earnings management. Journal of Business Ethics, 126(1), 43–60.CrossRefGoogle Scholar
  68. Skinner, D., & Soltes, E. (2011). What do dividends tell us about earnings quality? Review of Accounting Studies, 16(1), 1–28.CrossRefGoogle Scholar
  69. Surroca, J., & Tribó, J. A. (2008). Managerial entrenchment and corporate social performance. Journal of Business Finance and Accounting, 35(5–6), 748–789.CrossRefGoogle Scholar
  70. Szwajkowski, E., & Figlewicz, R. E. (1999). Evaluating corporate performance: A comparison of the fortune reputation survey and the socrates social rating database. Journal of Managerial Issues, 11(2), 137–154.Google Scholar
  71. Valentine, S., & Fleischman, G. (2008). Professional ethical standards, corporate social responsibility, and the perceived role of ethics and social responsibility. Journal of Business Ethics, 82(3), 657–666.CrossRefGoogle Scholar
  72. Waddock, S. (2003). Myths and realities of social investing. Organization and Environment, 16(3), 369–380.CrossRefGoogle Scholar
  73. Waddock, S. A., & Graves, S. B. (1997). The corporate social performance—financial performance link. Strategic Management Journal, 18(4), 303–319.CrossRefGoogle Scholar
  74. Walls, J. L., Berrone, P., & Phan, P. H. (2012). Corporate governance and environmental performance: Is there really a link? Strategic Management Journal, 33(8), 885–913.CrossRefGoogle Scholar
  75. Warfield, T. D., Wild, J. J., & Wild, K. L. (1995). Managerial ownership, accounting choices, and informativeness of earnings. Journal of Accounting and Economics, 20(1), 61–91.CrossRefGoogle Scholar
  76. Webb, E. (2004). An examination of socially responsible firms’ board structure. Journal of Management and Governance, 8(3), 255–277.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V., part of Springer Nature 2017

Authors and Affiliations

  • Audrey Hsu
    • 1
  • Kevin Koh
    • 2
  • Sophia Liu
    • 1
  • Yen H. Tong
    • 2
  1. 1.College of ManagementNational Taiwan UniversityTaipeiTaiwan
  2. 2.Division of Accounting, Nanyang Business SchoolNanyang Technological UniversitySingaporeSingapore

Personalised recommendations