Impact of Corporate Social Responsibility Activity on Analysts’ Behavior
57 Pages Posted: 31 Oct 2015 Last revised: 18 Mar 2016
Date Written: March 17, 2016
We investigate whether or not a firm’s corporate social responsibility (CSR) activities influence analysts’ behavior. CSR is concerned with the impact of corporations’ present actions on the ecosystems, societies, and environments of the future and includes both positive and negative attributes. Firms with a lower degree of social responsibility activities (e.g., more concerns than strengths) are characterized by less reputation, high risk, high information asymmetry and non-transparent disclosures. These are attributes analyst care about and may influence their behavior. We therefore expect and find that analyst following and consensus forecast accuracy increase and that dispersion among consensus analyst forecasts and revision volatility decrease as the degree of CSR activities increases. We further find that the influence is driven by the CSR strengths while being limited by CSR concerns. We show that CSR activities are relevant to an important user group and as a result, we inform regulators as they debate a CSR reporting framework and assurance standards.
Keywords: Analyst Following, Analyst Forecasts, Corporate Social Responsibility, CSR, Forecast Accuracy, Forecast Dispersion, Forecast Revision Volatility
JEL Classification: G240, M410
Suggested Citation: Suggested Citation