No abstract

Recent research finds that investors' assessments of a stock's fundamental value are influenced by corporate social responsibility (CSR) performance through the affect‐as‐information heuristic. We extend prior research by examining two boundary conditions for the use of this heuristic: (i) whether the CSR performance relates to activities that are integrated in a firm's core business practices (material CSR issues) or not (immaterial CSR issues), and (ii) whether the CSR performance is positive or negative. Employing an experimental method, we find that the affect‐as‐information heuristic applies only to immaterial CSR issues but not to material CSR issues, and only to positive but not negative CSR performance. Our findings suggest that investors likely use a heuristic approach to process immaterial and positive CSR issues, and a more deliberate and systematic approach to process material or negative CSR issues. Our study has both practical and theoretical implications.

No abstract

This study investigates the effects on organization's financial performances of, firstly, the extent to which the organizations are involved in controversial business activities, and secondly, their level of social performance. These companies can be considered non-socially responsible given the harmful nature of the activities they are involved in. Managers of these companies may still have incentives to pursue socially responsible actions if they believe that engaging on those actions will help them to achieve legitimacy and improve investors' perception about them. We develop a comprehensive methodology to investigate these corporate social performance related effects in a complex but specific setting. To this end, we analyze a sample of 202 US firms for the period 2003-2008 using a novel method in this area: partial least squares. Our results indicate that, contrary to the general findings in prior literature, companies involved in controversial business activities which engage in corporate social performance (CSP) do not directly reduce the negative perception that stakeholders have about them. Instead, we found evidence of a positive mediation effect of CSP on financial market-based performance through innovation.

We examined the significance of the audit report in loan rating decisions using the belief revision model. We designed a laboratory experiment where the sign of the audit report is mixed with other annual financial information in a series of sequential evidence. The results of an experimental design, using 106 loan officers from international financial institutions, support the hypothesis that the qualified audit report appears to be an independent and useful piece of evidence when it is contrary to favourable financial expectations. Our findings also support that the 'recency effect' might influence international commercial loan officers' perception of the qualified audit report. Copyright (c) The Authors Journal compilation (c) 2007 AFAANZ.

This study examines how loan requests for intensifying corporate social performance (CSP) activities and loan requests for increasing innovation intensity affect loan officers' credit judgments and lending decisions. In addition, the impact of a balanced loan request for both CSP and innovation intensity was examined. An experiment was designed by manipulating the purpose of a loan request from a pharmaceutical company in order to create four alternative lending scenarios: (1) a full loan request for intensifying CSP activities; (2) a full loan request for increasing innovation intensity; (3) a loan request for a balanced investment in both CSP and innovation; and (4) a general purpose loan request (control group). The findings support that CSP investment is interpreted by loan officers as an indicator of superior corporate financial performance. However, no clear positive relationship between innovation intensity and lending decisions was found. These results are consistent with the view that lenders could be reluctant to fund innovation intensity initiatives because there may be a considerable time lag between this investment and its payoff. Contrary to expectations, a balanced loan request for both CSP and innovation was not interpreted by loan officers as the most favorable lending scenario for an innovative firm.

auditing, going concern, Moral Seduction Theory, Throughput Model, ethical dilemmas, self-fulfilling prophecy, litigation risk, whistle-blowing function,

No abstract