Sentiment analysis of CSR disclosures in annual reports of EU companies

Abstract

The aim of the paper is to evaluate the sentiment of the CSR disclosures of EU companies required to publish such disclosures after it was made compulsory and investigate the determinants of these sentiments. The analysis is used to support either the signalling hypothesis or the opportunistic behavior hypothesis in corporate reporting that form a background for decision support systems using sentiment analysis. The research procedure involved the content analysis of a sample of EU companies’ annual reports, the sentiment analysis of CSR disclosures of the reports, and the multivariate regression. The research sample consists of 102 EU companies required to prepare a non-financial statement, but only those companies that are just-above-the-threshold. The results show that the sentiment of CSR disclosures is correlated with the company size, although only in the case of positive tone the correlation is positive. The larger companies tend to avoid negative words. The signaling hypothesis is confirmed only in the case of a positive sentiment: the extent of positive tone correlates positively with financial performance. This result is useful in further research on the determinants of a CSR disclosure sentiment, and in decision support systems that utilize a sentiment analysis of CSR reports.