CSR Reporting and Firm Value: International Evidence on Management Discussion and Analysis

Abstract

This study examines whether and how the practice of providing CSR information in the management discussion and analysis (MD&A) section of annual reports affects the relation between CSR performance and firm value in an international context. Based on a large sample from 42 countries, our results indicate that while providing CSR information in the MD&A section does not increase the price investors are willing to pay for the stock of a firm with high CSR performance, it does decrease the price they will pay for the stock of firms with high CSR concerns. Further analyses show that this finding is more likely to be observed when the perceived CSR reporting quality is greater, the level of investors’ CSR awareness is higher, and the development of a country’s institutional environment is better. Finally, consistent with the conjecture that the CSR disclosure channel matters to investors, our evidence shows that firms with high CSR concerns are less likely to provide environmental and social information in their annual reports.

Keywords: Corporate Social Responsibility, Firm Value, Institutions, Voluntary Disclosure, MD&A

JEL Classification: G15, M14, M4