Ownership Structure, Institutional Environment, and the Economic Consequences of Corporate Social Responsibility Information Disclosure: Evidence from Analysts’ Earnings Forecasts

Abstract

Abstract In recent years, as corporate social responsibility (CSR) has been drawing increasing public attention, the regulatory authorities in China have implemented a series of regulations and rules on the disclosure of CSR which have required listed companies to disclose CSR reports since 2008. This paper examines whether the disclosure of CSR-related information can provide useful information to investors. Specifically, we examine the impact of CSR disclosure on the accuracy and dispersion of analysts’ earnings forecasts. The results show that higher quality CSR disclosure by firms leads to smaller analysts’ earnings forecast errors and dispersion. The conclusions still hold after eliminating the endogenous concerns. In a further analysis, we find that the impact of CSR disclosure on the accuracy and dispersion of analysts’ earnings forecasts is stronger for firms which are ultimately controlled by private enterprises, located in regions with a good institutional environment, and in industries with high CSR concern. Collectively, our findings suggest that the disclosure of CSR-related information provides useful information to investors and decreases the degree of information asymmetry. Meanwhile, the relationship between CSR disclosure and forecast accuracy is also affected by the structure of corporate ownership, institutional environment, and industry characteristics.