The Information Content of Corporate Social Responsibility Disclosures in Europe: An Institutional Perspective

European Accounting Review

64 Pages Posted: 22 Apr 2019 Last revised: 29 Apr 2020

See all articles by Stephanie Mittelbach-Hoermanseder

Stephanie Mittelbach-Hoermanseder

WU Vienna

Katrin Hummel

WU Vienna University of Economics and Business

Margarethe Rammerstorfer

Vienna University of Economics and Business - Department of Corporate Finance

Date Written: April 28, 2020

Abstract

This study examines how firm value (measured via stock prices) is related to corporate social responsibility (CSR) disclosure and how the institutional environment influences this relationship. To test our hypotheses, we apply textual analysis to our data on firms listed in the STOXX Europe 600 for the period 2008–2016. Our investigation of topic-specific CSR disclosure indicates that when firms shifted from voluntary to mandatory reporting, following the announcement of Directive 2014/95/EU, the association between their share price and CSR disclosure became significantly negative. For the period before the announcement, this relationship is either positive or statistically insignificant. We also show that the institutional environment can impact this relationship in four distinct ways: the level of CSR awareness, the level of employee protection, the degree of enforcement and the strength of the legal environment. We find that the first two have a negative impact on the incremental value relevance of specific CSR disclosure, whereas the last two have a positive impact. Lastly, our results also indicate that the magnitude of (a) the relationship between a firm’s CSR disclosure and its value and (b) the impact that the firm’s institutional environment has on this relationship depends on the specific CSR topics. .

Keywords: CSR disclosure, value relevance, information environment, textual analysis, institutional environment

Suggested Citation

Mittelbach-Hoermanseder, Stephanie and Hummel, Katrin and Rammerstorfer, Margarethe, The Information Content of Corporate Social Responsibility Disclosures in Europe: An Institutional Perspective (April 28, 2020). European Accounting Review, Available at SSRN: https://ssrn.com/abstract=3365521 or http://dx.doi.org/10.2139/ssrn.3365521

Stephanie Mittelbach-Hoermanseder (Contact Author)

WU Vienna ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Katrin Hummel

WU Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Margarethe Rammerstorfer

Vienna University of Economics and Business - Department of Corporate Finance ( email )

Welthandelsplatz 1
1020 Vienna
Austria

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