The value relevance of social reporting: evidence from listed Italian companies

Abstract

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.

The Value Relevance of Environmental, Social, and Governance Performance: The Brazilian Case

“…It is therefore necessary to analyse whether the effect of CSR performance on stock prices holds after including both variables in regression models (3) and (4). Finally, we use data on the share price at the end of the first quarter of the following year to avoid the effect on the results of having taken the prices at year end [16,17].…”

“…This model has been widely used in the field of CSR research by using information on social responsibility as this additional information [13,[15][16][17][18][19][20][21]. Following, therefore, the existing literature for other markets, in this study we propose the application of Ohlson's model [39] to estimate the value relevance in the São Paulo Stock Exchange of the CSR performance level of the companies listed on it.…”

“…This theory suggests, therefore, that the implementation of sustainability initiatives may not be profitable and, therefore, this is likely to destroy the value of the company. Although the literature on CSR and shareholder value creation provides mixed results [29][30][31], a growing number of studies support the value enhancing theory [13,16,18,19,[32][33][34][35][36].…”

“…However, the potential benefit to a shareholder of the company in which it invests carrying out CSR activities depends on how that information affects the stock market value of the shares [14]. Although most of the existing empirical evidence has obtained results in favour of the value relevance of CSR practices, these studies have focused mainly on the analysis of developed markets in Europe [15][16][17][18] and North America [19][20][21].…”

“…Second, most studies have used as their corporate sustainability indicators the publication of sustainability reports [15][16][17][18][19] or the inclusion of the company in a socially responsible index [13,18,20,21]. These binary variables have a number of disadvantages.…”