Original scientific paper
https://doi.org/10.1080/1331677X.2020.1761420
Does corporate social responsibility matter to management forecast precision? Evidence from China
Xiangyu Chen
Peng Wan
Xiaofeng Quan
Muhammad Safdar Sial
Abstract
This article investigates whether socially responsible companies
differ from other firms in the quality of earnings forecasts issued
by management. Specifically, using 5192 earnings forecast observations
of 669 Chinese listed companies from 2010 to 2016, we
examine whether companies that perform better in corporate
social responsibility (CSR) still provide higher-precision management
earnings forecasts compared with companies with poor CSR
performance, thereby presenting an image of transparent and
accountable disclosures. Through empirical research, this paper
finds that CSR is positively associated with management forecast
precision. This result is robust to using alternative measures of
CSR, considering mandatory disclosure sample and voluntary disclosure
sample, and controlling for potential endogeneity concern
by adopting the instrumental variable method. Furthermore, we
find the relationship between CSR and management forecast precision
is stronger in non-state-owned firms. Our findings suggest
that socially responsible companies will comply with higher ethical
standards and hence maintain their well-established social
reputation by disclosing high-quality earnings forecasts, which
lends support to the transparent forecast hypothesis. This paper
enriches the existing studies regarding the economic consequences
of CSR and adds empirical evidence from emerging markets.
Keywords
Corporate social responsibility; management forecast precision; ownership type; China
Hrčak ID:
254504
URI
Publication date:
9.2.2021.
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