Undervaluation and non‐financial information: Evidence from voluntary disclosure of CSR news

Mohammed Benlemlih, Jingwen Ge and Sujiao Zhao
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Mohammed Benlemlih: Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School
Jingwen Ge: ESSCA Research Lab - ESSCA - ESSCA – École supérieure des sciences commerciales d'Angers = ESSCA Business School
Sujiao Zhao: Banco de Portugal - Banco de Portugal, Universidade do Porto = University of Porto

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Abstract: In this paper, we examine whether stock market imperfection plays a role in a firm's decision to release non‐financial information and if so, what the underlying channels are. To address our questions, we web‐scraped corporate social responsibility (CSR) news to form a sample of publicly traded non‐financial US firms from CSRwire and explored exogeneous variation in stock valuation driven by institutional price pressure. Our empirical results show that firms facing stock market undervaluation are more likely than others to release CSR news. This effect is concentrated among firms exhibiting low levels of CSR commitment and low stock price informativeness. Finally, we provide evidence that the stock market reacts positively to CSR news released by undervalued firms and more so for undervalued firms with high information asymmetry.

Date: 2020-10-19
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Published in Journal of Business Finance and Accounting, 2020, 48 (5-6), pp.785-814. ⟨10.1111/jbfa.12505⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04998902

DOI: 10.1111/jbfa.12505

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