The CSR reporting polygraph - Do investors distinguish between firms taking responsibility and firms laying out impression traps while assessing the long-term growth?

Sammanfattning: Driven by the recent global legislative developments and stakeholders' demands, CSR is becoming an integral part of the generally accepted global business practices. Previous research has examined the impact of CSR performance on accounting- and market based measures, but there is currently no academic consensus on the nature of this relationship (Borglund et al., 2017). Despite the fact that the CSR nudges the companies to abandon the short-term logic, the relationship between CSR and the long-term growth rate have not been studied. This study investigates the relationship between a firm's CSR performance and the implied long-term growth rates by analyzing three factors; the quality of reporting, the performance on material ESG aspects and the occurrence of ESG-related scandals. The study conducts panel data regression analysis on 77 companies listed on Nasdaq OMX Nordic over the period 2007-2016. The findings indicate that investors embed both the performance on material CSR aspects and the occurrence of negative CSR related events into their predictions of the long-term growth rate. Furthermore, the study suggests that the external assurance of sustainability reports enhances the credibility of the CSR performance for investors. Conclusively, in the absence of external assurance of sustainability reports, the media serves as an external party validating the CSR performance information.