Are CSR Disclosures Value Relevant? Cross-Country Evidence

Abstract

Using proprietary data that rate corporate social responsibility (CSR) disclosures of firms in 21 countries, this study examines how the strength of nation-level institutions affects the extent of CSR disclosures. We then examine the valuation implications of CSR disclosures and consider how the relation between CSR disclosures and firm value varies across countries. In contrast to prior studies, we separate CSR disclosures into an expected and unexpected portion where the unexpected portion is a proxy for the incremental information contained in CSR disclosures. We observe a positive relation between unexpected CSR disclosure and firm value measured by Tobin's Q. We also find that, while countries with strong nation-level institutions promote more CSR disclosures, the valuation of a unit increase in unexpected CSR disclosures is higher when nation-level institutions are weak.

Corporate social responsibility reporting by South African mining companies: Evidence of legitimacy theory

“…This is consistent with the arguments presented by the IIRC (2013) and Atkins and Maroun (2015) that so-called non-financial measures are important for understanding how organisations generate financial returns in the long-term (see also Marcia, Maroun and Callaghan, 2014;Cahan et al, 2016). In other words, sustainability goes hand-in-hand with financial performance to provide a complete measure of corporate success.…”

Islamic Governance, National Governance, and Bank Risk Management and Disclosure in MENA Countries

“…In particular, this offers a new evidence to suggest that banks in better governed countries engage in greater RDPs compared with their poorly governed counterparts. To the best of our knowledge, this is the first empirical evidence to examine the impact of NGQ on RDPs, although this finding offers further empirical support for the findings of prior studies that suggest that NGQ has a positive effect on general voluntary disclosures (Barakat & Hussainey, 2013;Cahan et al, 2015). This evidence is also consistent with the expectations of our neo-institutional theoretical perspective, which suggests that improved NGQ can provide additional layer of monitoring that can help mitigate the level of information asymmetry, hence offering bank executives greater motivation to commit to increased risk disclosures.…”

“…For instance, endogeneity problems (Barakat & Hussainey, 2013;, time frame differences (Abraham & Cox, 2007;, and different risk disclosure measures can affect the research findings. On the other hand, others suggest that the mixed results relating to the governance-RDPs nexus can be addressed by concentrating on how probable theory-driven variables moderate such a relationship (Aguilera, 2005;Aguilera et al, 2008;Alon & Dwyer, 2014;Cahan et al, 2015;Ernstberger & Grüning, 2013;Essen et al, 2013).…”

“…In the case of IGQ and NGQ, for example, it has been argued from a neo-institutional theoretical perspective that they can help in determining how bank executives treat their shareholders, as well as make decisions, including those relating to voluntary disclosures (Essen, Engelen, & Carney, 2013), and thus, can arguably ultimately affect RDPs directly. Also, and despite the growing suggestions that NGQ may be an important driver of bank strategies, behavior, and valuation (Alon & Dwyer, 2014;Ernstberger & Grüning, 2013;Essen et al, 2013;Tunyi & Ntim, 2016), the extant research relating to the impact of NGQ on disclosure quality (e.g., RDPs) has received little attention (Alon & Dwyer, 2014;Cahan, De Villiers, Jeter, Naiker, & Van Staden, 2015;Schiehll, Ahmadjian, & Filatotchev, 2014).…”

Earnings Management and CSR Disclosure. Family vs. Non-Family Firms

“…The Italian setting is of particular interest for two main reasons. The first is that the institutional context may influence CSR disclosure usefulness [25][26][27] and also a firm's propensity to resort to earnings management practices [28]; empirical literature on the relation between earnings management and CSR disclosure has concentrated on Anglo-American contexts, while our study explores a new setting. The second is that family control is the prevalent form of ownership structure of both private and listed companies in Italy [29].…”