Corporate Responsibility Disclosure, Information Environment and Analysts’ Recommendations: Evidence from Malaysia

Abstract

The purpose of this study was to extend our understanding of how corporate social responsibility (CSR) disclosures impact capital market participants, specifically sell-side analysts. The sample of this study was based on a dataset from a panel of 285 Malaysian firms for the period of 2008–2013 (738 firm-year observations). This study employed ordinary least square regression. This study found that firms with better CSR disclosures are more likely to receive optimistic investment recommendations. Subsample analyses revealed that the CSR-recommendation nexus is more pronounced under a transparent information environment (i) when there is less family control and (ii) when a firm is audited by a prominent Big Four auditor. The results implied that analysts tend to give favorable stock recommendations to high CSR companies operating in a more transparent information environment. To gain analysts’ confidence and make them more appreciative of the CSR disclosures, family firms with proactive CSR engagement are encouraged to switch to Big Four auditors or to seek assurance on their CSR reports. This study broadens our understanding of the factors influencing analysts’ recommendations and the preferences of analysts towards CSR engagement in an emerging market. This paper expands the literature on how corporate responsibility disclosures impact analysts’ final output, as reflected in the recommendation opinion, an area that has so far received little attention, particularly in emerging markets. Furthermore, this study also provides fresh evidence that analyst behavior towards CSR disclosures varies based on the strength of the firm’s information environment.

CEO Characteristics, Family Ownership and Corporate Social Responsibility Reporting: The Case of Saudi Arabia

“…Despite a large body of literature on family businesses, empirical research on familycontrolled firms and CSR is still in its infancy [3]. Ref.…”

“…In recent years, corporate social responsibility (CSR) has emerged as a critical and enduring topic that has attracted rapidly growing scholarly attention. This explosion reflects increasing awareness among firms of their roles and responsibilities to the community as well as the environment [1][2][3][4][5]. CSR participation by firms has been extensively scrutinized by the media, socially responsible investors, and numerous CSR rating agencies, such as Morgan Stanley Capital International, Sustainalytics, FTSE Russell, Bloomberg, and Thomson Reuters, and any CSR misconducts could have a significant impact on a firm's reputation and its sustainability [6].…”

Institutional investor heterogeneity and analyst recommendation: Malaysian evidence

“…The study makes the following contributions. First, most studies that examine the determinants of analysts' stock recommendations have considered various firm-specific factors such as corporate governance strength (Papangkorn et al, 2020;Yu, 2011), corporate social responsibility initiatives (Alazzani et al, 2021;García-Sánchez et al, 2020;Ioannou & Serafeim, 2015;Wan-Hussin et al, 2021), earnings growth and risk (Peasnell et al, 2018), shareholder rights (Autore et al, 2009), equity incentive plans (Liu, 2017), financial restatements (Qasem et al, 2020) and degree of internationalisation (Luo & Zheng, 2018). Our study extends the literature by examining the relationship between institutional investor heterogeneity and sell-side analyst stock recommendation, an area that has so far received little attention.…”

Firm and Board Characteristics, and E-Waste Disclosure: A Study in the Era of Digitalisation

“…Therefore, having many persons sit on the board with various experience and qualifications may enhance their legitimacy. Past studies have demonstrated a strong association between sustainability or environmental practices and board size [31,[52][53][54]. Benomran, et al [52], who studied the effect of board size on corporate social and environmental disclosure in Libya, revealed the positive and significant linkage between the two.…”