The Value Relevance of Environmental and Social Disclosures - Evidence from the UK Stock Market

51 Pages Posted: 29 Dec 2016 Last revised: 26 Oct 2017

See all articles by Cristiana Bernardi

Cristiana Bernardi

The Open University - Business School

Andrew W. Stark

Alliance Manchester Business School, University of Manchester

Date Written: October 2017

Abstract

Motivated by the requirements of the UK Companies Act 2006 and the subsequent Directive 2014/95/EU of the European Parliament and of the Council, we investigate the relationship between environmental and social disclosures (analyst following) and analyst following (environmental and social disclosures). We do so to investigate the value relevance of information about environmental and social performance, in a context where corporate managers have to gauge the level of disclosures necessary to satisfy the requirements of the Act. Our analysis provides support for the requirements of the UK and EU with respect to disclosures concerning environmental and social performance – the evidence is consistent with their value relevance and an associated demand for such disclosures from informed market participants. It further is consistent with the assumption that corporate managers take into account the demand for such value relevant, environmental and social disclosures in gauging the appropriate amount of such disclosures. Stepping outside the policy dimension to our work, we can also argue that our results also suggest positive links between analyst following and the quality of environmental and social disclosure.

JEL Classification: M4

Suggested Citation

Bernardi, Cristiana and Stark, Andrew W., The Value Relevance of Environmental and Social Disclosures - Evidence from the UK Stock Market (October 2017). Available at SSRN: https://ssrn.com/abstract=2891045 or http://dx.doi.org/10.2139/ssrn.2891045

Cristiana Bernardi (Contact Author)

The Open University - Business School ( email )

Milton Keynes, MK6 7AA
United Kingdom

Andrew W. Stark

Alliance Manchester Business School, University of Manchester ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

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