Migrating to Global Reporting Initiative Guidelines: Does International Harmonization of CSR Information Pay?

Abstract

AbstractThousands of organizations worldwide currently use the Global Reporting Initiative (GRI) standards to report on sustainability information. We use data from 39 countries over the 2010–2018 period to examine the incremental value relevance of the international harmonization of corporate social responsibility (CSR) disclosure. A propensity score matching–difference in differences (PSM‐DID) research design was used to avoid selection bias and endogeneity concerns. We find that migrating to the GRI guidelines destroys firm value. This relationship is stronger for firms with poor CSR performance, which suggests that market players, particularly institutional investors, consider GRI migration as a cost driver – at least in the short term. The introduction of other potentially confounding institutional factors highlights the effectiveness of the negative relationship between firm value and GRI migration for countries with more opaque financial markets and less sustainable business environments. Our findings have several implications for policymakers, academics and practitioners in understanding both the motivations and the consequences of CSR harmonization reporting on financial markets.