Estelle Sun

Voluntary corporate social responsibility disclosure and religion

Purpose This study examines the relation between voluntary corporate social responsibility (CSR) disclosure and the local religious norms of firms’ stakeholders. Little is known about how these local norms (measured at the county level) affect firms’ disclosure practices and firm value, especially voluntary disclosure on climate change and environmental and social responsibility. Design/methodology/approach Poisson regression models test for a significant relation between firms’ voluntary CSR disclosure intensity and the local religious norms of firms’ stakeholders. Also, an event study tests whether the local religious norms affect investment returns. The data analyzed are extracted from the archive of CSRwire, a prominent news organization that distributes CSR news to investors and the public worldwide. Findings The study finds that firms in high adherence (high churchgoer) locations disclose CSR activities less frequently, and firms in high affiliation (a high proportion of non-evangelical Christian churchgoers) locations disclose CSR activities more frequently. The study also finds that managers make firm-value-increasing CSR disclosure decisions that cater to the religious and social norms of the local community. Practical implications The results imply that managers self-identify with the local religious norms of stakeholders and appropriately disclose less about CSR activities when religious adherence is high and when religious affiliation (the ratio of non-evangelicals to evangelical Christians) is low. The authors find this noteworthy because religious bodies often call for greater CSR involvement and disclosure. Yet, at the firm level, it would appear that local community religious norms also prevail, as it is shown that they significantly explain firms’ CSR disclosure behavior, implying that managers cater to local religious norms in their disclosure decisions. Social implications The findings suggest that managers vary the timing and intensity of voluntary CSR disclosure consistent with stakeholders’ local religious and social norms and that it would be costly and inefficient if the firms were to expand CSR disclosure without considering the religious norms of their local community. Originality value This is the first large-sample study to show that local religious norms affect CSR disclosure behavior. The study makes use of a unique and novel data set obtained exclusively from CSRwire.

Yahoo Finance Search and Earnings Announcements

We use Yahoo Finance search to examine the effects of investor attention at earnings announcements. We find that Yahoo Finance search at earnings announcements is a major factor explaining earnings responses and is predictive of subsequent returns. Moreover, we show that other measures of investor attention (e.g., Google search, EDGAR search) are less informative in explaining earnings responses and subsequent returns. The findings suggest the importance of investor attention, and in particular, retail attention in the pricing of financial information.

Earnings Announcement Promotions: A Yahoo Finance Field Experiment

This study presents a field experiment in which media articles for a random sample of firms with earnings announcements are promoted to a one percent subset of Yahoo Finance users. Promoted firms have higher abnormal returns and some evidence of lower bid-ask spreads on the day of the earnings announcement. These results are more pronounced for less visible firms, negative earnings news, and on days with fewer promoted firms. These findings suggest that investor attention affects the pricing of earnings and that retail investors buy stocks that catch their attention, in a setting where attention is randomly assigned.

Sentiment, Loss Firms, and Investor Expectations of Future Earnings

This study investigates the mispricing of market-wide investor sentiment by exploring the relation between sentiment and investor expectations of future earnings. Prior research argues that sentiment-driven mispricing should be most pronounced for hard-to-value firms, such as those reporting losses (Baker and Wurgler 2006). Using investor expectations of future earnings, we provide empirical results consistent with this behavioral finance theory. In particular, we predict and find that investors perceive losses to be more (less) persistent during periods of low (high) sentiment; that investors perceive profit persistence to be lower (higher) during periods of low (high) sentiment; and that the effects appear stronger for loss firms relative to profit firms. In addition, we document predictable cross-sectional variation within losses, with the mispricing mitigated for losses associated with activities expected to generate future benefits: R&D, growth, large negative special items, and severe financial distress. Overall, our results document a new and important channel—investor expectations of future earnings—to explain sentiment-driven mispricing, particularly for loss firms.

Investor Reliance on the Crowd

Using Yahoo Finance search data, we document that when investors search for investment information they by far and large rely on the information of crowds. The results indicate that this reliance significantly varies across industries, and is most pronounced in firms with greater uncertainty and weaker information environments. Moreover, significant increases in the reliance on message boards consistently predict future negative stock returns and increases in information asymmetry, suggesting that investors’ increasing reliance on crowds provides insights into their expectations of firm performance and future sell-offs.