Articlegreen2020

Do Markets Punish or Reward Corporate Social Responsibility Decoupling?

Isabel Sánchez · Nazim Hussain · Sana Akbar Khan · Jennifer Martínez‐Ferrero

252 citations0/0 files storedBusiness & Society

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Corporate Social Responsibility Reporting Auditing, Earnings Management, Governance Corporate Governance and Financial Management

Abstract

This article analyzes the relationship between corporate social responsibility (CSR) decoupling and financial market outcomes. CSR decoupling refers to the gap between CSR disclosure and CSR performance. More specifically, we analyze the effect of CSR decoupling on analysts’ forecast errors, cost of capital, and access to finance. We also examine the moderating effect of forecast errors on relationships between CSR decoupling and cost of capital and access to finance. For a sample of U.S. firms consisting of 7,681 firm-year observations for the period 2006–2015, our empirical evidence supports the idea that a wider gap results in higher analysts’ forecast errors, a greater cost of capital, and reduced access to finance. In addition, our results show that forecast errors enhance the effect of the CSR decoupling on cost of capital and access to financial resources. We also note that external monitoring, in the form of greater analysts’ coverage, reduces CSR decoupling.

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References

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Cited by

2022Governing Corporate Social Responsibility Decoupling: The Effect of the Governance Committee on Corporate Social Responsibility Decoupling 2022Exploring sustainable development goals reporting practices: From symbolic to substantive approaches—Evidence from the energy sector 2021Assurance of corporate social responsibility reports: Examining the role of internal and external corporate governance mechanisms 2021Assurance of corporate social responsibility reports: Does it reduce decoupling practices?2023Does SDG disclosure reflect corporate underlying sustainability performance? Evidence from UN Global Compact participants

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