How Disclosure Features of Corporate Social Responsibility Reports Interact with Investor Numeracy to Influence Investor Judgments

41 Pages Posted: 19 Apr 2014 Last revised: 30 Mar 2016

See all articles by W. Brooke Elliott

W. Brooke Elliott

University of Illinois at Urbana-Champaign

Stephanie M. Grant

University of Washington

Kristina M. Rennekamp

SC Johnson Graduate School of Business; Cornell SC Johnson College of Business

Date Written: March 29, 2016

Abstract

Firms’ Corporate Social Responsibility (CSR) reports typically frame their strategies in terms of either community or global efforts (i.e., “strategy frame”). Further, the style used to depict CSR performance in reports often highlights either pictures or words (i.e., “presentation style”). These two prominent disclosure features of CSR reports promote a natural fit or misfit in the focus (relatively low-level or high-level focus) investors adopt when thinking about the firm and its CSR efforts. Further, these disclosure features likely have different effects on investors depending on their numeracy or, in other words, the way that they naturally process numerical information. In this study we predict and find that a fit between the strategy frame and the presentation style of a firm’s CSR report causes less numerate investors to be more willing to invest than when a fit is not present. Specifically, we find that a fit leads less numerate investors to experience subjective feelings of processing fluency and, in turn, positive affect that serves as a cue that the positive CSR performance information can be relied upon, which positively influences willingness to invest. Our results have implications for both CSR reports as well as other types of firm disclosures that increasingly vary along similar disclosure characteristics. Our results also contribute to both the growing literature on presentation effects in accounting, as well as the broader business literature on CSR reporting.

Keywords: disclosure style, presentation effects, corporate social responsibility, investor numeracy

JEL Classification: C91, G18, M41, M42

Suggested Citation

Elliott, W. Brooke and Grant, Stephanie M. and Rennekamp, Kristina M., How Disclosure Features of Corporate Social Responsibility Reports Interact with Investor Numeracy to Influence Investor Judgments (March 29, 2016). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2425731 or http://dx.doi.org/10.2139/ssrn.2425731

W. Brooke Elliott (Contact Author)

University of Illinois at Urbana-Champaign ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Stephanie M. Grant

University of Washington ( email )

Box 353200
Seattle, WA 98195-3200
United States
(206) 543-2904 (Phone)

Kristina M. Rennekamp

SC Johnson Graduate School of Business ( email )

Ithaca, NY 14853
United States
607-255-0500 (Phone)

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

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