Does corporate social responsibility matter to management forecast precision? Evidence from China

Abstract

This article investigates whether socially responsible companies differ from other firms in the quality of earnings forecasts issued by management. Specifically, using 5192 earnings forecast observations of 669 Chinese listed companies from 2010 to 2016, we examine whether companies that perform better in corporate social responsibility (CSR) still provide higher-precision management earnings forecasts compared with companies with poor CSR performance, thereby presenting an image of transparent and accountable disclosures. Through empirical research, this paper finds that CSR is positively associated with management forecast precision. This result is robust to using alternative measures of CSR, considering mandatory disclosure sample and voluntary disclosure sample, and controlling for potential endogeneity concern by adopting the instrumental variable method. Furthermore, we find the relationship between CSR and management forecast precision is stronger in non-state-owned firms. Our findings suggest that socially responsible companies will comply with higher ethical standards and hence maintain their well-established social reputation by disclosing high-quality earnings forecasts, which lends support to the transparent forecast hypothesis. This paper enriches the existing studies regarding the economic consequences of CSR and adds empirical evidence from emerging markets.

Management Financial Incentives and Firm Performance in a Sustainable Development Framework: Empirical Evidence from European Companies

“…Moreover, the results detailed in Table 1 highlight that except for the ESG reporting scope (ESG_rep) and the presence or absence of the sustainability compensation incentives (Sust_comp_incent) (the results are not statistically significant), all the other sustainable development dimensions, namely the existence of the CSR sustainability committee (CSR_sust_com), the use of energy (Energy_use) and of the renewable energy (Renew_energy), and also the implementation of a policy sustainable packaging (Policy_sust), have positively and statistically significant influenced the financial performance of the selected European companies. Similar findings were obtained by Barontini and Bozzi [21], Ruparelia and Njuguna [8] and Chen et al [78], that underlined the paramount role of CSR mechanisms for financial performance of the companies [79].…”

Corporate social responsibility and SMEs' performance: mediating role of corporate image, corporate reputation and customer loyalty

“…CI can be maintained and managed by consistency in CSR-related initiatives and CSR practices towards ethics and responsibility in their business conduct. According to Xiangyu et al (2020), CR is sensitive and vulnerable to any shortcomings of the organisation such as discrimination, insincerity, irresponsibility or behaviour that violates ethics. Consequently, any of these shortcomings makes all other efforts worthless.…”

Do Board Gender Diversity and Non-Executive Directors Affect CSR Reporting? Insight from Agency Theory Perspective

“…The CSMAR database provides in-depth information about the financial aspects of Chinese companies, information which also includes the composition of the board, the number of directors, and the financial performance of companies [86]. Meanwhile, the RKS rating agency leads in providing information regarding to the CSR activities of Chinese firms, in line with the Global Reporting Initiative (3.0), and it has been considered one of the most credible sources of such information in past studies as well [87,88]. We restricted our sample to all non-financial companies.…”

“…The CSR reporting information was obtained from the RKS rating agency. The RKS Rating agency leads in providing information regarding the CSR activities of Chinese firms, in line with the Global Reporting Initiative (3.0), and it has been considered as one of the most credible sources of such information in past studies as well [87,88]. The range of the CSR rating is from zero to a hundred.…”