Corporate Social Responsibility Report Narratives and Analyst Forecast Accuracy

50 Pages Posted: 29 Dec 2016 Last revised: 7 Mar 2019

See all articles by Volkan Muslu

Volkan Muslu

C.T. Bauer College of Business University of Houston

Sunay Mutlu

Kennesaw State University - Michael J. Coles College of Business

Suresh Radhakrishnan

JSOM, University of Texas at Dallas

Albert Tsang

York University - Schulich School of Business

Date Written: December 1, 2016

Abstract

Standalone corporate social responsibility (CSR) reports vary considerably in the content of information released due to their voluntary nature. In this study, we develop a disclosure score based on the tone, readability, length, and the numerical and horizon content of CSR report narratives, and examine the relationship between the CSR disclosure scores and analyst forecasts. We find that CSR reporters with high disclosure scores are associated with more accurate forecasts, whereas low score CSR reporters are not associated with more accurate forecasts than firms who do not issue CSR reports. The findings are robust to controlling for firm characteristics including CSR activity ratings and financial narratives. The findings are driven by experienced CSR reporters rather than first-time CSR reporters. Together, our findings suggest that the content of CSR reports helps to improve analyst forecast accuracy, and this relationship is more pronounced for CSR reports with more substantial content.

Keywords: Corporate social responsibility reporting, textual disclosures, analyst forecasts

JEL Classification: M4

Suggested Citation

Muslu, Volkan and Mutlu, Sunay and Radhakrishnan, Suresh and Tsang, Albert, Corporate Social Responsibility Report Narratives and Analyst Forecast Accuracy (December 1, 2016). Journal of Business Ethics, Volume 154, Issue 4, pp 1119–1142, February 2019. Available at SSRN: https://ssrn.com/abstract=2891023

Volkan Muslu

C.T. Bauer College of Business University of Houston ( email )

4750 Calhoun Road
Houston, TX 77204
United States
713 7434924 (Phone)

Sunay Mutlu

Kennesaw State University - Michael J. Coles College of Business ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States

Suresh Radhakrishnan

JSOM, University of Texas at Dallas ( email )

Mail Stop SM 41
800 West Campbell Road
Richardson, TX 75080
United States
972-883-4438 (Phone)
972-883-6811 (Fax)

Albert Tsang (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

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