Nonfinancial Disclosure and Analyst Forecast Accuracy: International Evidence on Corporate Social Responsibility Disclosure

We examine the relationship between disclosure of nonfinancial information and analyst forecast accuracy using firm-level data from 31 countries. We use the issuance of stand-alone corporate social responsibility (CSR) reports to proxy for disclosure of nonfinancial information. We find that the iss...

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Bibliographic Details
Published in:The Accounting review 2012-05, Vol.87 (3), p.723-759
Main Authors: Dhaliwal, Dan S., Radhakrishnan, Suresh, Tsang, Albert, Yang, Yong George
Format: Article
Language:English
Subjects:
A FORUM ON CORPORATE SOCIAL RESPONSIBILITY RESEARCH IN ACCOUNTING
Accounting
Accuracy
Analytical forecasting
Business structures
Communication
Corporate social responsibility
Correlation analysis
Countries
Disclosure
Earnings forecasting
Economic forecasts
Estimate reliability
Financial disclosure
Financial reporting
Forecasting models
Forecasting standards
Forecasts
Investors
Opacity
Social responsibility
Studies
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Summary:We examine the relationship between disclosure of nonfinancial information and analyst forecast accuracy using firm-level data from 31 countries. We use the issuance of stand-alone corporate social responsibility (CSR) reports to proxy for disclosure of nonfinancial information. We find that the issuance of stand-alone CSR reports is associated with lower analyst forecast error. This relationship is stronger in countries that are more stakeholder-oriented—i.e., in countries where CSR performance is more likely to affect firm financial performance. The relationship is also stronger for firms and countries with more opaque financial disclosure, suggesting that issuance of stand-alone CSR reports plays a role complementary to financial disclosure. These results hold after we control for various factors related to firm financial transparency and other potentially confounding institutional factors. Collectively, our findings have important implications for academics and practitioners in understanding the function of CSR disclosure in financial markets.
ISSN:0001-4826
1558-7967
DOI:10.2308/accr-10218