Corporate Social Responsibility Performance and Annual Report Narrative Disclosure Readability.

Abstract

We examine the effect of corporate social responsibility (CSR) performance on annual report narrative disclosure readability. We find that firms with higher CSR performance provide less readable annual report, especially in the 'Notes to consolidated financial statements' (NOTES) section rather than 'Management Discussion and Analysis' (MD&A) section. The CSR performance effect is mainly through the channels of firm profitability and financial leverage, supporting shareholder theory and tax shield concern. Meanwhile, we also find that the channels vary with the different motivations of conducting CSR activities. Finally, the CSR performance effect on NOTES section readability significantly becomes weaker during the financial crisis period.