Abstract:
Using proprietary data that rate corporate social responsibility (CSR) disclosures of firms in
21 countries, this study examines how the strength of nation-level institutions affects the
extent of CSR disclosures. We then examine the valuation implications of CSR disclosures
and consider how the relation between CSR disclosures and firm value varies across
countries. In contrast to prior studies, we separate CSR disclosures into an expected and
unexpected portion where the unexpected portion is a proxy for the incremental
information contained in CSR disclosures. We observe a positive relation between
unexpected CSR disclosure and firm value measured by Tobin's Q. We also find that, while
countries with strong nation-level institutions promote more CSR disclosures, the valuation
of a unit increase in unexpected CSR disclosures is higher when nation-level institutions are
weak.
