Abstract

http://ssrn.com/abstract=2030891
 


 



Integrating Sustainability Reports into Financial Statements: An Experimental Study


Markus C. Arnold


Institute for Accounting

Alexander Bassen


University of Hamburg

Ralf Frank


DVFA

June 11, 2012


Abstract:     
In recent years, sustainability has increasingly attracted the attention of capital market participants. While event studies have established that stock prices react to news about environmental, social, and governance (ESG) performance, further empirical evidence raises the question of whether market participants always rationally process ESG information included in a standalone sustainability report. In an experiment with investment professionals, this study investigates whether a disconnect between financial statements and sustainability reports leads to an anchoring effect in the assessment of ESG information. Results show that users of standalone sustainability reports fully adjust their valuations to the level of integrated (financial and sustainability) report users following information about bad ESG performance. However, none of the standalone reports users adjust their valuations following information about good ESG performance. Thus, financial statement users asymmetrically anchor on their financial value judgments when assessing ESG information provided in a standalone report.

Number of Pages in PDF File: 44

Keywords: Sustainability, financial performance, ESG information, anchoring

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Date posted: March 29, 2012 ; Last revised: June 26, 2012

Suggested Citation

Arnold, Markus C. and Bassen, Alexander and Frank, Ralf, Integrating Sustainability Reports into Financial Statements: An Experimental Study (June 11, 2012). Available at SSRN: http://ssrn.com/abstract=2030891 or http://dx.doi.org/10.2139/ssrn.2030891

Contact Information

Markus C. Arnold (Contact Author)
Institute for Accounting ( email )
Engehaldenstr. 4
Bern, 3012
Switzerland
Alexander Bassen
University of Hamburg ( email )
Von-Melle-Park 5
20146 Hamburg
Germany
Ralf Frank
DVFA ( email )
Mainzer Landstrasse 47a
Frankfurt, 60329
Germany
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