Investment Professionals’ Use of Corporate Social Responsibility Disclosures

• In Event: Perceptions of Non-financial Information

Abstract

We conduct an experiment to examine investment professionals’ use of corporate social responsibility (CSR) disclosures when making personal investment decisions or investment recommendations to clients. We predict and find that investment professionals are more willing to personally invest and recommend investment to a client when a firm discloses positive CSR performance than when it makes no CSR disclosures. Investment professionals’ investment decisions and recommendations are influenced by CSR disclosures both because, on average, they believe that better CSR performance is associated with better financial performance and because they value the societal benefits of CSR. These findings hold separately for the effect of assessed CSR performance on both current and longer-term financial performance. We also find that investment professionals’ general beliefs regarding whether CSR activities benefit society are an important predictor of how they assess firms’ CSR performance as well as how they view the relation between CSR performance and financial performance. Finally, our results suggest that investment professionals’ experience may shield them from the potential biasing effect of appealing pictures that accompany many CSR disclosures.

Authors

• Markus C Arnold, University of Bern

• Christoph Hoerner, University of Bern

• Patrick Ryan Martin, Indiana University - Bloomington

• Donald V Moser, University of Pittsburgh