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Nonfinancial Disclosure and Analyst Forecast Accuracy: International Evidence on Corporate Social Responsibility Disclosure

Posted: 30 Apr 2010 Last revised: 22 Aug 2012

Dan S. Dhaliwal

University of Arizona - Department of Accounting

Suresh Radhakrishnan

University of Texas at Dallas - School of Management

Albert Tsang

Schulich School of Business

Yong George Yang

The Chinese University of Hong Kong (CUHK) - Faculty of Business Administration

Date Written: July 1, 2011

Abstract

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

Suggested Citation

Dhaliwal, Dan S. and Radhakrishnan , Suresh and Tsang, Albert and Yang, Yong George, Nonfinancial Disclosure and Analyst Forecast Accuracy: International Evidence on Corporate Social Responsibility Disclosure (July 1, 2011). Accounting Review, Vol. 87, No. 3, 2012. Available at SSRN: https://ssrn.com/abstract=1596458 or http://dx.doi.org/10.2139/ssrn.1596458

Dan S. Dhaliwal (Contact Author)

University of Arizona - Department of Accounting ( email )

McClelland Hall
PO Box 210108
Tucson, AZ 85721
United States

Suresh Radhakrishnan

University of Texas at Dallas - School of Management ( email )

2601 North Floyd Road
Richardson, TX 75083-0688
United States
972-883-4438 (Phone)
972-883-6811 (Fax)

Albert Tsang

Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Yong George Yang

The Chinese University of Hong Kong (CUHK) - Faculty of Business Administration ( email )

Shatin, N.T.
Hong Kong

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