Managing disclosure of political risk: The case of socially responsible firms

Indrarini Laksmana, Maretno A. Harjoto and Hoyoung Kim

Journal of Business Research, 2023, vol. 154, issue C

Abstract: Based on agency theory, signaling theory, and moral capital theory, we examine whether and how corporate social responsibility (CSR) performance influences firms’ political risk disclosure. We also examine the impact of such disclosure on institutional ownership and financial analysts’ forecast dispersion and forecast error and whether the impact depends on CSR performance. We find that stronger CSR performers provide less disclosure of political risk than weaker CSR performers, suggesting that CSR performance is a substitute for political risk disclosure. We find that political risk disclosure is associated with lower percentage of ownership by institutional investors with long-term investment horizons and higher analyst forecast dispersion and forecast error. However, we find that CSR performance cancels out the negative impact of political risk disclosure on institutional ownership and analyst forecast dispersion/error, suggesting that institutional investors and financial analysts put less weight on such disclosure issued by more CSR-oriented firms.

Keywords: Political risk disclosure; CSR performance; Institutional investors; Analysts; Moral capital theory (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:154:y:2023:i:c:s0148296322008311

DOI: 10.1016/j.jbusres.2022.113366

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