Corporate social responsibility and financial reporting quality: evidence from US firms

Abstract

Purpose This study aims to examine the relationship between corporate social responsibility (CSR) and measures of financial reporting quality. Design/methodology/approach The authors explore the link between CSR and several indicators of firms’ financial reporting quality. Estimation with firm and year fixed effects is based on a sample of US publicly traded firms covering the period from 1991 to 2018. Findings Empirical results demonstrate that firms with higher CSR scores are associated with higher accuracy of financial forecasts, fewer earnings surprises and greater coverage by financial analysts. This positive relationship is more profound for firms that face low agency concerns, firms that have a higher level of customer awareness, firms that have more long-term institutional ownership or firms that do not face financial constraints. Originality/value The study contributes to the ongoing debate on the value of CSR. The results support the stakeholder value maximization view of CSR and identify the impact of several factors on its relationship with the quality of financial reporting.