Do Markets Punish or Reward Corporate Social Responsibility Decoupling?

Isabel-María García-Sánchez, Nazim Hussain, Sana Akbar Khan, Jennifer Martínez-Ferrero*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

29 Citations (Scopus)
361 Downloads (Pure)

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.
Original languageEnglish
Pages (from-to)1431-1467
Number of pages37
JournalBusiness & Society
Volume60
Issue number6
Early online date10-Jan-2020
DOIs
Publication statusPublished - 2021

Keywords

  • cost of capital
  • CSR
  • Decoupling
  • Forecast error
  • KZ index
  • NONFINANCIAL DISCLOSURE
  • FINANCIAL CONSTRAINTS
  • ANALYST COVERAGE
  • PERFORMANCE
  • COST
  • ORGANIZATIONS
  • REPLICATION
  • GOVERNANCE
  • MANAGEMENT

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