Nonfinancial Disclosure and Analyst Forecast Accuracy: International Evidence on Corporate Social Responsibility Disclosure
Dan S. Dhaliwal
University of Arizona - Department of Accounting
University of Texas at Dallas - School of Management
The Chinese University of Hong Kong (CUHK) - School of Accountancy
Yong George Yang
The Chinese University of Hong Kong (CUHK) - Faculty of Business Administration
July 1, 2011
Accounting Review, Vol. 87, No. 3, 2012
We examine the relationship between disclosure of nonfinancial information and analyst forecast accuracy using firm-level data from 31 countries. We use the issuance of standalone corporate social responsibility (CSR) reports to proxy for disclosure of nonfinancial information. We find that the issuance of standalone CSR reports is associated with lower analyst forecast error. This relationship is stronger in countries that are more stakeholder-oriented — i.e., in countries where CSR performance is more likely to affect firm financial performance. The relationship is also stronger for firms and countries with more opaque financial disclosure, suggesting that issuance of standalone CSR reports plays a role complementary to financial disclosure. These results hold after we control for various factors related to firm financial transparency and other potentially confounding institutional factors. Collectively, our findings have important implications for academics and practitioners in understanding the function of CSR disclosure in financial markets.
Keywords: nonfinancial information, CSR, analyst forecast, disclosure
JEL Classification: M41, M45
Date posted: April 30, 2010 ; Last revised: August 22, 2012
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