CSR Performance, Disclosure Tone, and Cost of Capital: Evidence from European Non-Financial Reporting

Bianca Minuth and Paul Pronobis ()
Additional contact information
Bianca Minuth: ESCP Business School, Paris, France
Paul Pronobis: Free University of Bozen-Bolzano, Italy

No BEMPS109, BEMPS - Bozen Economics & Management Paper Series from Faculty of Economics and Management at the Free University of Bozen

Abstract: This study examines how corporate social responsibility (CSR) performance relates to firms’ disclosure tone in CSR reports and their resulting cost of capital. Our empirical analysis reveals that firms with superior CSR performance exhibit systematic patterns in their disclosure tone, characterized by increased usage of positive language and decreased usage of negative language. In contrast, firms with lower CSR performance show no significant strategic communication patterns. Our analysis reveals a complex relationship between CSR performance, disclosure tone, and cost of capital. While CSR performance and optimistic disclosure tone individually have positive associations with cost of capital, their interaction exhibits a significant negative relationship. This finding suggests that the impact of CSR performance on cost of capital is contingent on the optimistic tone employed in CSR disclosures. Firms with strong CSR performance can enhance the favorable impact on their financing costs by adopting a more optimistic disclosure tone, potentially offsetting the standalone positive association between CSR performance and cost of capital. Further analysis reveals that these effects are more pronounced in the pre-NFRD period, indicating that the transition from voluntary to mandatory reporting altered the economic consequences of CSR disclosure strategies.

Keywords: CSR Performance; Disclosure Tone; Cost of Capital; Strategic Communication; Non-financial Reporting. (search for similar items in EconPapers)
JEL-codes: G3 M14 M48 Q5 (search for similar items in EconPapers)
Pages: [55 pages]
Date: 2025-02
New Economics Papers: this item is included in nep-acc, nep-cfn and nep-eff
References: Add references at CitEc
Citations:

Downloads: (external link)
https://repec.unibz.it/bemps109.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bzn:wpaper:bemps109

Access Statistics for this paper

More papers in BEMPS - Bozen Economics & Management Paper Series from Faculty of Economics and Management at the Free University of Bozen Contact information at EDIRC.
Bibliographic data for series maintained by F. Marta L. Di Lascio () and Alessandro Fedele ().