Corporate Social Responsibility and Earnings Forecasting Unbiasedness

32 Pages Posted: 4 May 2012 Last revised: 28 Nov 2014

See all articles by Leonardo Becchetti

Leonardo Becchetti

University of Rome Tor Vergata - Faculty of Economics

Rocco Ciciretti

University of Rome II - Department of Economics and Finance

Alessandro Giovannelli

University of Rome Tor Vergata

Date Written: April 21, 2012

Abstract

We investigate the relationship between Corporate Social Responsibility (hereafter CSR) and I/B/E/S analysts' earnings per share (EPS) forecasts using a large sample of US firms for the 1992-2011 period. Based on literature fi ndings we decompose the CSR eff ect into four factors: accounting opacity, corporate governance, stakeholder risk, and overinvestment. We document that all of them signi ficantly aff ect both the absolute forecast error on EPS and its standard deviation controlling for forecast horizon, number of analysts and forecasts, and for year, industry, broker house eff ects. Consistently with our ex ante hypotheses, overinvestment, stakeholder risk and accounting opacity have a positive e ffect increasing both dependent variables, while corporate governance quality has a negative e ffect. A crucial aspect of our fi ndings is that high CSR quality in terms of the four factors (i.e. accounting transparency, high corporate governance quality, stakeholder risk mitigation and absence of overinvestment) contributes to making earning forecasts unbiased as unbiasedness is generally met in the subsample of the top 33 percent CSR quality companies, while it is markedly violated in the subsample of the bottom 33 percent CSR companies.

Keywords: Earnings per Share, Analyst Forecast, Corporate Social Responsibility

JEL Classification: D84, E44, F30, G17, C53

Suggested Citation

Becchetti, Leonardo and Ciciretti, Rocco and Giovannelli, Alessandro, Corporate Social Responsibility and Earnings Forecasting Unbiasedness (April 21, 2012). CEIS Working Paper No. 233. Available at SSRN: https://ssrn.com/abstract=2050870 or http://dx.doi.org/10.2139/ssrn.2050870

Leonardo Becchetti

University of Rome Tor Vergata - Faculty of Economics ( email )

Via Columbia, 2
I-00133 Rome
Italy

Rocco Ciciretti (Contact Author)

University of Rome II - Department of Economics and Finance ( email )

Via Columbia, 2
Roma, 00133
Italy
+39 06 72595925 (Phone)

HOME PAGE: http://directory.uniroma2.it/index.php/schede/getPubblicazioni/948

Alessandro Giovannelli

University of Rome Tor Vergata ( email )

Via di Tor Vergata
Rome, Lazio 00133
Italy

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