CSR Report Narratives and Analyst Forecast Accuracy

Source: Springer, 4 January 2017

Standalone corporate social responsibility (CSR) reports vary considerably in the content of information released due to their voluntary nature. In a scientific study (by Volkan Muslu, Sunay Mutlu, Suresh Radhakrishnan and Albert Tsang) a disclosure score has been developed 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. They 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, the 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.

The paper with the results is published in the Journal of Business Ethics.

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Download the paper (pdf) (via SSRN)