Despite the increasing level of interest in CSR issues, it is not yet clear what real value the market assigns to social reporting. By applying the value relevance analysis to a sample of 130 European‐listed banks, the present work proposes a key to understanding the relationship between social reporting and the value that the market attributes to banks that publicize their commitment to CSR through social reporting. The analysis for the entire sample does not provide evidence that investors attribute value relevance to social reporting (i.e. there is not a significant correlation between the publication of a social report and the stock price). Cross‐country analysis shows that in some countries the social report is value‐relevant, and positively affects the stock price; in others it remains value‐relevant but negatively affects the stock price. Our findings could have several implications for banks, investors, and policymakers. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment.

Applying value relevance analysis to a sample of European banks, we test the following: (i) the direct effects of the sustainability report on stock price; (ii) whether the report modifies the value relevance of financial accounting variables (indirect effects); and (iii) whether the value relevance of sustainability reports varies across countries. Results show that investors appreciate the additional and complementary disclosure provided by the sustainability report and that this disclosure produces a positive effect on stock prices. Estimates of the indirect effects demonstrate that it has a negative influence on book value per share, whereas the effect on earnings per share is not significant. Cross-country analysis shows that the value relevance of the sustainability report varies across European countries, consistent with the hypothesis that the value relevance of the sustainability report is likely to be influenced by different institutional contexts.

Purpose -This paper aims to test whether the publication of a social report provides information about the firm's market value. Its intention is to understand if investors believe the social report has a role equal to that traditionally attributed to accounting variables, i.e., whether the social report is value-relevant in assessing a firm's market value. Design/methodology/approach -This paper is deductive. It tests two main hypotheses: first, the social report is value relevant because it explains firm value; second, the social report influences the value-relevance of accounting variables. The study applies the value-relevance analysis on a sample of 178 Italian companies listed on the Milan Stock Exchange. Findings -The estimates show a significant negative correlation between the publication of a social report and the stock price. Furthermore, book value per share accounting information is more relevant for the companies that publish a social report, whereas the relevance of earnings per share does not change for these companies. Originality/value -This paper increases the understanding of the value that markets assign to the social report. It contributes to enriching the literature on the value-relevance analysis applied to non-financial variables and to social report in particular.

We examine the impact of a corporate social responsibility (CSR) rating announcement on the credit default swap (CDS) spreads of European firms. Our results indicate that a CSR rating upgrade leads to an immediate and significant decrease in CDS spreads of rated firms. In contrast, CSR rating downgrades do not have a significant immediate impact on the CDS market. Additionally, better CSR ratings, in terms of both the overall score and the scores for the three main CSR pillars (economic, environmental, and social), lead to lower CDS spreads. Therefore, we document that the CSR rating is a measure of CSR performance that affects market CDS prices. Our findings are consistent with the risk mitigation view, highlighting the benefits derived from CSR commitment. Consequently, CSR engagement can function as a tool for improving firm's creditworthiness. This result may provide an incentive to pay more attention to CSR in managerial, regulatory, and investment decisions.

The mixed results of previous empirical investigations on the relevance of firms' reporting on sustainable development could be due to the absence of a theoretical paradigm able to capture the differences across countries. We apply the varieties of capitalism approach on a sample of European listed banks from 2005 to 2011, to evaluate whether the different institutional contexts affect the value relevance of sustainability reporting in European stock markets. The results show that sustainability reporting is more relevant in coordinated market economies compared with liberal market economies and mixed market economies. The main findings are that systemic and institutional factors influence the impact of sustainability reporting on the firm's market value, and the varieties of capitalism approach provides an important theoretical framework to grasp and highlight differences across European countries on the value relevance of firms' reporting on sustainable development. Copyright