Does more equal less? - Empirical evidence of the impact of CSR disclosure levels on the cost of equity capital among Swedish listed firms

Sammanfattning: The purpose of this study is to investigate the relationship between the cost of equity capital and levels of CSR disclosure. The recent implementation of a European-level directive that established a minimum level of mandatory CSR disclosure, motivates us to further investigate the regulatory impact on the relationship. Due to its high level of reporting practices, stakeholder-friendly orientation and early CSR legislative initiatives, the study focuses on the Swedish market. To evaluate the levels of CSR disclosure we use a self-constructed CSR index, inspired by recent academic studies. The index is based on outputs from the automated content-analysis tool CFIE-FRSE. The content comes from stand-alone and integrated CSR reports of 92 companies listed on Nasdaq Stockholm Exchange, over the period 2013-2018. Our findings show two notable observations. First, an inverse association exists between the two variables, however the perceived benefits of increasing a firm's CSR disclosure levels are of minor economic significance. Second, the announcement of more extensive CSR disclosure legislation is associated with a stronger inverse relationship. We thereby contribute to existing literature by, first, providing further evidence over the value-relevance of CSR information, second, by extending the discussion of capital market implications of announced legislation and third, by contributing to the discussion over the usefulness of automated content analysis tools in economic analyses.