Are CSR Disclosures Value Relevant? Cross-Country Evidence

Abstract

Proactive strategies in the area of corporate social responsibility are becoming a “business imperative” (Kanter 2011). However, the credibility of firms’ disclosures about corporate social responsibility (CSR) activities remains unknown. While they may be informative, we cannot rule out the possibility that they are opportunistic and provide little useful information. We provide evidence on this issue by investigating the association between abnormal (i.e., unexpected) CSR disclosures and firm value using an international sample of firms drawn from 22 countries. If these disclosures are informative and CSR activities are value-adding, as Kanter (2011) suggests, we should observe a positive relation between corporate social responsibility disclosures and firm value. Consistent with this view, we find that firm value increases with abnormal CSR disclosure. We also present evidence that while countries with stronger governance and institutions promote more CSR disclosures, the valuation of a unit increase in abnormal CSR disclosures is higher in countries with weaker governance and institutions.