CSR Disclosure, Analyst Forecasts and Firm Value: Evidence from Financial Restatements
57 Pages Posted: 17 May 2019
Date Written: May 4, 2019
This study examines the changes in CSR disclosure and the impacts of CSR disclosure on analyst forecasts and firm value during financial restatements. Our results reveal that restating firms substantively improve their CSR disclosure quality via a change of disclosure tone, report readability, and the sustainability-related word usage following a restatement. We also find that the improvement is stronger in restating firms with low CSR disclosure quality. Further, we find that in the post-restatement period analysts’ forecast revisions are faster for firms with prior CSR reporting, and despite the downward post-restatement revision, analyst forecasts are still optimistically biased for restating firms with CSR disclosure. Moreover, restating firms with CSR disclosure are associated with smaller forecast errors and less dispersion than restating firms that do not engage in CSR reporting. Finally, we report that restating firms with CSR disclosure suffer less value losses from the restatement, consistent with the view that CSR reporting helps to repair reputation damage and protect firm value.
Keywords: corporate social responsibility; analyst forecasts; firm value; financial restatements
JEL Classification: M14, G17, G14
Suggested Citation: Suggested Citation