Corporate Social Responsibility Report Narratives and Analyst Forecast Accuracy

Abstract

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.

Mandating the Sustainability Disclosure in Annual Reports—Evidence from the United Kingdom

“…Finally, we are interested in whether the regulation affects other textual attributes, namely, tone, readability, numerical content and report length. Recently, Muslu et al (2017) aggregated these textual attributes into a sustainability disclosure measure and show a positive relationship with analyst forecast accuracy. In the context of mandatory sustainability disclosure regulation, prior research has often examined the reporting of good versus bad news as a potential consequence of mandatory disclosure regulations (Chauvey et al 2015;Costa and Agostini 2016;Larrinaga et al 2002).…”

“…It is often argued that numerical information is more accurate, objective, comparable and verifiable (Clarkson et al 2008;Clarkson et al 2011). Muslu et al (2017) show higher analyst forecast accuracy for sustainability reports that contain more numerical content.…”

“…37 Finally, we are also interested in whether the overall length of the annual report (report_length) changes because of the adoption of the SR Regulations. While Loughran and McDonald (2014) argue that file size can serve as an inverse proxy for readability, as managers provide longer and more complex reports for obfuscation reasons, other researchers argue that longer reports simply provide more information than shorter reports (Li 2008;Muslu et al 2017). In the context of sustainability disclosure, Nazari et al (2017) show that the length of a firm's standalone sustainability report is positively associated with sustainability performance.…”

A practice theoretical analysis of the irrelevance of integrated reporting to mainstream sell‐side analysts

“…They attribute these changes to the possible linking of the firm's financial information with previously disconnected and largely unrecorded information on various nonfinancial capitals in integrated reports. Bernardi and Stark (), extending prior research that finds a relationship between corporate social reporting and analyst forecast accuracy (see, Dhaliwal et al ., ; Muslu et al ., ), investigate whether implementing IR changes the relationship between the extent of ESG disclosures and analyst forecast accuracy. They find that this association is greater for integrated reporters.…”

Análise dos indicadores de sustentabilidade empresarial: mapeamento bibliométrico da literatura internacional e levantamento qualitativo

“…Em função da baixa quantidade de resultados obtidos a partir da busca em português, um artigo, optou-se por desconsiderar das análises a serem desenvolvidas a publicação em questão, por não haver nenhum parâmetro de comparação e categorização em âmbito nacional. BRAAM et al, 2016;MORHARDT;BAIRD;FREEMAN, 2002;MUSLU et al, 2017), e tem foco maior na metodologia de relato do que no conteúdo efetivo a ser apresentado (FONSECA, 2010;MUSLU et al, 2017), o que dificulta a comparação entre os dados e a visualização de progresso por parte das empresas (VELEVA; BODKIN; TODOROVA, 2017).…”