Corporate social responsibility orientation and textual features of financial disclosures

Marwa Soliman and Walid Ben-Amar

International Review of Financial Analysis, 2022, vol. 84, issue C

Abstract: This paper examines the relationship between corporate social responsibility (CSR) orientation and textual attributes of financial disclosures. Using a large U.S. sample from 1999 to 2017, we find that firms with high CSR orientation provide more readable disclosures and use a less ambiguous tone in their annual reports. These findings are consistent with the notion that managers in CSR-conscious firms adhere to high ethical standards and commit to improving the transparency of their firms' financial disclosures. Our results are robust to alternative measures of readability and CSR performance, potential endogeneity, and sampling methods. Moreover, in a cross-sectional analysis, we show that the impact of CSR on corporate readability/tone ambiguity is more pronounced for firms with weak corporate governance. Overall, the results suggest that CSR serves as a substitute for traditional corporate governance mechanisms to ensure transparent disclosure.

Keywords: Corporate social responsibility; Corporate disclosure; Textual analysis; Readability; Disclosure tone (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:84:y:2022:i:c:s1057521922003507

DOI: 10.1016/j.irfa.2022.102400

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