z-logo
Premium
Can Excellence in Corporate Social Performance Improve Investors' Financial Assessments and Credibility of Managers' Forecasts?
Author(s) -
Guiral Andres,
Moon Doocheol,
Choi Hyunjung
Publication year - 2014
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12057
Subject(s) - excellence , credibility , corporate social responsibility , accounting , business , profitability index , finance , public relations , political science , law
In contrast to the extensive archival research on the relationship between corporate social performance and financial performance, behavioral studies are scarce. We explore whether excellence in corporate social performance affects investors' judgments of financial assessments (i.e., future profitability, liquidity, and financial risk) and credibility of management's forecasts. We define “excellence in corporate social performance” as the case of a firm simultaneously showing high and stable social performance and being provided with professional assurance on social activity reporting. We design a 2 × 2 experimental design with two control groups by manipulating corporate social performance (high versus low) and assurance (present versus absent), in which investors are asked to provide their judgments on the financial status of the firm. Our results indicate that corporate social performance excellence has an impact on both investors' financial assessments and their reliance on management‐forecasted information. Additional analysis shows that corporate social performance excellence is perceived as having a significantly higher impact on investors' financial assessments and their credibility of managers' forecasts in comparison with temporary corporate social performance. Therefore, we find support for the argument that only the combination of superior and stable corporate social performance and reliable corporate social responsibility disclosure pays off.

This content is not available in your region!

Continue researching here.

Having issues? You can contact us here