10-K Disclosure of Corporate Social Responsibility and Firms’ Competitive Advantages
European Accounting Review (Forthcoming)
61 Pages Posted: 8 Jul 2016 Last revised: 9 Oct 2019
Date Written: September 16, 2019
In this paper, we offer evidence that disclosure of corporate social responsibility (CSR) in the 10-K provides information about firms’ competitive advantages. We create a textual measure of CSR disclosure that aggregates CSR keywords found in 10-Ks. We measure firms’ competitive advantages by using levels of and persistence of industry-adjusted gross margin; selling, general, and administrative (SG&A) margin; and operating margin. We first show that 10-K CSR disclosure intensity is associated with lower levels of gross margin but higher SG&A margin. We then observe that firms with more CSR keywords in their 10-Ks maintain more persistent above-industry-median gross and operating margins. Upon sorting our full set of 10-K CSR keywords into three subcategories (philanthropy, business practice, and product), we find that the intensities of disclosure in these CSR subcategories have associations with varying competitive advantages.
Keywords: corporate social responsibility, non-financial disclosure, competitive advantage, operating performance
JEL Classification: M14, M41, L29
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