Stock Analysts and Corporate Social Responsibility

47 Pages Posted: 7 Sep 2015 Last revised: 11 Mar 2018

See all articles by Hui Dong

Hui Dong

Shanghai University of Finance and Economics - School of Accountancy

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Xintong Zhan

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Date Written: February 22, 2017

Abstract

This paper investigates the informational motive of corporate policy in corporate social responsibility (CSR), as managers’ assessments of cost-benefit tradeoff of social goodness are likely to be influenced by the information supply from stock analysts. We exploit the exogenous changes in analyst coverage to measure variations in firms’ information supply, using brokerage closures and mergers as natural experiments. The results show that a drop in analyst coverage and the consequently reduced information supply cause a firm to engage in less socially responsible activities. And the results cannot be explained by the variations in financial constraints, through which analysts influence other corporate investments. Taken together, our findings suggest that firms are more likely to “do good” if the market has been provided with more information to value corporate social goodness.

Keywords: Analyst coverage; Information production; Corporate social responsibility

JEL Classification: G24; G30

Suggested Citation

Dong, Hui and Lin, Chen and Zhan, Xintong, Stock Analysts and Corporate Social Responsibility (February 22, 2017). Available at SSRN: https://ssrn.com/abstract=2656970 or http://dx.doi.org/10.2139/ssrn.2656970

Hui Dong

Shanghai University of Finance and Economics - School of Accountancy ( email )

No. 777 Guoding Road, Shanghai
Shanghai, 200433
China

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Xintong Zhan (Contact Author)

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

Cheng Yu Tung Building
Shatin, NT
Hong Kong

HOME PAGE: http://sites.google.com/view/xintongzhan

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