Are CSR disclosures relevant for investors? Empirical evidence from Germany

Abstract

Purpose – The purpose of this paper is to examine whether narrative corporate social responsibility (CSR) disclosures (the provision of textual information on companies’ environmental and social performance to external stakeholders) are associated with firm value in Germany. Design/methodology/approach – Based on the global reporting initiative guidelines, the paper uses content analysis to assess the value relevance of CSR disclosures of 130 German companies over four years. Findings – The results show that CSR information is value-relevant, but the value relevance of CSR information differs among CSR categories. Specifically, the disclosure of social information is positively associated with firm value yet environmental disclosures are not. Practical implications – The results confirm that management should be aware of the potential capital market effects of voluntary CSR disclosures, even though such disclosures may be directed at other stakeholders. Originality/value – Germany is an interesting setting as CSR disclosures are voluntarily, even though the institutional environment appears sensitive to CSR disclosures. Despite this, little research has focussed upon the value-relevance of CSR-disclosures in Germany. In addition, the results confirm that management should be aware of the potential capital market effects of voluntary CSR disclosures, even though they are not directed at shareholders as such.

The Impact of Sustainability Practices on Corporate Financial Performance: Literature Trends and Future Research Potential

“…A complete bibliographic listing of collected literature has been compiled, which includes titles, Sustainability 2018, 10, 494 3 of 25 journals, authors, years of publication, etc. Descriptive statistics were also utilized, such as number of publications per unit of time and journal distribution of publications [3,22,23].…”

Sustainability Reporting and Firm Value: Evidence from Singapore-Listed Companies

“…Many benefits from good CSR reporting within the broader related aspect of sustainability, such as attraction of better talent and motivation of employees, cannot be mimicked by poor CSR performers as the latter face obligations to incur future CSR expenditures with no incremental returns to shareholders, which implies that CSR disclosures increase firm value [28][29][30][31].…”

Determinants of Corporate Social Responsibility Disclosure: An Empirical Study of Polish Listed Companies

“…The factors that influence the scope of CSR disclosures have been extensively discussed in prior literature. Studies we refer to in this paper often focus on one country, e.g., US (Giannarakis [8,15]), Libya (Bayoud et al [44]), Malaysia (Rahman et al [45]; Said et al [46]; Haniffa and Cooke [47]), Egypt (Hussainey et al [48]), Bangladesh (Rouf [49]; Khan [50]), Indonesia (Siregar and Bachtiar [43]), Germany (Verbeeten et al [42]; Gamerschlag et al [51]), Spain (Reverte [41]); Portugual (Branco and Rodrigues [52]), Sweden (Tagesson et al [53]), and India (Hossain and Reaz [54]). In addition, a cross-country analysis is performed by Ho and Taylor [55], who investigated the CSR disclosure of 50 of the largest US and Japanese companies.…”

“…One consequence is the demand for enhanced CSR disclosures, which, as presented in the section above, can be explained by their desire to get or maintain legitimacy. Companies usually inform stakeholders of their CSR activities in the annual report or in separate CSR reports [41,42].…”

“…The researchers often use content analysis and develop their own disclosure indexes in order to measure the extent of CSR disclosures (e.g., Verbeeten et al [42]; Bayoud et al [44]; Rahman et al [45]; Said et al [46]; Haniffa and Cooke [47]; Hussainey et al [48]; Rouf [49]; Khan [50]; Gamerschlag et al [51]; Tagesson et al [53]; Ho and Taylor [55]). However, Giannarakis [8,15] used as a proxy for the extent of CSR disclosure the environmental, social, and governance disclosure score calculated by Bloomberg, while Reverte's [41] data on CSR disclosure ratings come from the Observatory on Corporate Social Responsibility (OCSR).…”