Sustainable development goals disclosure and analyst forecast quality

Giuseppe Nicolò · Giovanni Zampone · Giuseppe Sannino · Paolo Tartaglia Polcini

34 citations0/0 files storedJournal of Applied Accounting Research

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

Abstract

Purpose This study aims to investigate the relationship between corporate sustainable development goals (SDGs) disclosure and analyst forecast quality. Design/methodology/approach The study focuses on a sample of 95 Italian-listed companies preparing the mandatory non-financial declaration (NFD) according to the Global Reporting Initiative (GRI) standards over a five-year period (2017–2021), corresponding to an unbalanced sample of 438 observations. Analyst forecast quality was proxied by earnings forecast accuracy (FA) and earnings forecast dispersion (FD), built on data retrieved from the Refinitiv database. A manual content analysis was performed on NFDs to derive an SDG disclosure score (SDGD) for each sampled company. Findings This study provides empirical evidence suggesting that voluntary SDG disclosure matters to the capital market in that it helps enhance the information environment of companies, evidenced by improved analyst forecast quality. In particular, this study highlighted that SDG disclosure positively influences analyst FA while negatively affecting analyst FD. Research limitations/implications This study focuses on the Italian context, which has idiosyncratic characteristics regarding the structure of the financial market, the composition of corporate ownership and experience in non-financial reporting practices. Practical implications This study indicates to corporate managers that following GRI standards may represent the right way to better integrate SDG disclosure in corporate non-financial reports and increase the relevance of such information for investors and other capital market participants. Originality/value To the best of the authors’ knowledge, this is the first study that empirically examines the association between SDG disclosure and analyst forecast quality.

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References

1998Law and Finance 2001Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature 1983Discretionary disclosure 1996Corporate Disclosure Policy and Analyst Behavior.2010The financial reporting environment: Review of the recent literature 1999The Categorical Imperative: Securities Analysts and the Illegitimacy Discount 2012Nonfinancial Disclosure and Analyst Forecast Accuracy: International Evidence on Corporate Social Responsibility Disclosure 2021Mandatory CSR and sustainability reporting: economic analysis and literature review

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