The relationship between CSR disclosure quality and investor responsiveness to earnings news

Sammanfattning: This study investigates whether there is a relationship between Corporate Social Responsibility (CSR) disclosure quality and investor responsiveness to earnings news. The notion is that CSR disclosure quality can signal earnings quality. Given that investors recognise and react to the signal, this would lead to a stronger (weaker) market reaction for firms with good CSR disclosure quality announcing good (bad) earnings news. A sample of 68 Large and Mid Cap industrial firms listed on Nasdaq Nordic is used. Looking into the Annual and CSR Reports for fiscal year 2014 for each of the sample firms, CSR disclosure quality aims to measure the perceived underlying CSR performance. The disclosure quality is graded based on economic, environmental and social indicators suggested by the Global Reporting Initiative as well as the reporting quality criteria auditability, business model relevance and comparability. An event study methodology is used to observe the Earnings Response Coefficients (ERCs) for different levels of CSR disclosure quality. The results provide no strong evidence for a relationship between CSR disclosure quality and investor responsiveness to earnings news. The results, however, give some indication that there is a positive (negative) relationship between CSR disclosure quality and investor responsiveness to good (bad) earnings news. The relationship is more evident for bad news, and is amplified for CSR disclosure quality that only captures business model relevant CSR activities.