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

See all articles by James N. Cannon

James N. Cannon

Utah State University, School of Accountancy; Iowa State University

Zhejia Ling

Iowa State University - College of Business

Qian Wang

Iowa State University - College of Business

Olena V. Watanabe

Iowa State University - Debbie and Jerry Ivy College of Business

Date Written: September 16, 2019

Abstract

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

Suggested Citation

Cannon, James N. and Ling, Zhejia and Wang, Qian and Watanabe, Olena V., 10-K Disclosure of Corporate Social Responsibility and Firms’ Competitive Advantages (September 16, 2019). European Accounting Review (Forthcoming). Available at SSRN: https://ssrn.com/abstract=2805068 or http://dx.doi.org/10.2139/ssrn.2805068

James N. Cannon

Utah State University, School of Accountancy ( email )

3500 Old Main Hill
Logan, UT 84322-3500
United States
801-927-7718 (Phone)

Iowa State University ( email )

Ames, IA 50011-2063
United States
801-927-7718 (Phone)

Zhejia Ling

Iowa State University - College of Business ( email )

Ames, IA 50011-2063
United States
515-294-7882 (Phone)

Qian Wang

Iowa State University - College of Business ( email )

Ames, IA 50011-2063
United States

Olena V. Watanabe (Contact Author)

Iowa State University - Debbie and Jerry Ivy College of Business ( email )

613 Wallace Road
Ames, IA 50011-2063
United States

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