Jon D. Perkins

Developing Corporate Reporting in the Public Interest: The Question of Mandatory CSR Reporting and the Potential for Its Integration with Financial Reporting

Corporate social responsibility (CSR) reporting is emerging in response to demand from a broad range of stakeholders. Comparability and reliability of information would be enhanced if CSR reporting becomes mandatory. If CSR reporting is mandated, which we believe is desirable, the content and form of the disclosure needs to be determined. We examine the underlying conceptual frameworks for both CSR and financial reporting to determine whether it is feasible or desirable for CSR reporting to be integrated with financial reporting. We discuss whether a regulatory body or a participative entity should be responsible for developing an appropriate framework. We also discuss the potential for assurance if CSR reporting were to be integrated with financial reporting as well as specific problems that would be associated with the audit of integrated reports.

Assurance on Environmental Performance and Investor Judgments: The Impact of Environmental Attitudes

This study extends prior research by investigating and finding that nonprofessional investors’ attitudes regarding environmental sustainability affect their views on the relative importance of environmental versus financial performance and whether environmental performance affects firm investment returns. It also investigates how these views moderate the influence of environmental performance and assurance information on investor judgments. Environmental performance has a positive effect on the investment desirability and amount judgments of nonprofessional investors who find environmental performance relatively more important, and assurance has a positive effect on the investment desirability judgments of this same group of investors. However, neither environmental performance nor assurance affects the investment judgments of nonprofessional investors who believe that environmentally responsible companies yield higher returns. The results suggest that investors’ environmental attitudes are important in influencing the effects of environmental performance information on investment judgments.

Investor Attitudes, Investment Screen Use, and Socially Responsible Investment Behavior

There is an increasing demand for socially responsible investment (SRI), and SRI screens are an important source of information for investors. Yet, little is known about the relationship between investors’ attitudes, use of SRI screens, and actual SRI behavior. To examine this relationship, we gathered data on investors’ environmental attitudes, use of SRI screens, and SRI behavior. We find that four out of five components of the New Ecological Paradigm (NEP) scale, a measure of basic environmental attitudes, are associated with specific attitudes towards environmentally responsible investment. These specific attitudes in turn are positively associated with SRI screen use, and SRI screen use is positively associated with the percentage of investors’ portfolio held in SRIs. There is also a significant direct relationship between specific environmentally responsible investment attitudes and SRI holdings. Our results suggest that there are complex, multi-dimensional relationships between investor attitudes, SRI screen use, and investment behavior.

The Unintended Effect of Corporate Social Responsibility Performance on Investors’ Estimates of Fundamental Value

opportunities. One of the key issues relates to proxies. As is noted by the author, both CEM and CFP can be measured by various proxies. Some of these proxies are closely related with others while some are not (e.g. stock price is a function of accounting earnings, which is well established in equity valuation theory). Also, different proxies are of different quantitative metrics or measuring different aspects of the subject matter. As such, treating all studies using different proxies the same way may not be ‘fair’ and applying a single coefficient may not be very meaningful and interpretable. I believe a better understanding of what different proxies measure and how they are interrelated needs to be developed and incorporated into the implementation of the analysis. For instance, transformation techniques could probably be used to transform market-based measures of CFP to accounting-based measures of CFP. However, I could imagine that these transformations themselves would not be an easy task and probably requires expertise from other research areas. Moreover, under certain circumstances, such transformations are almost impossible (for instance, I do not see a way to transform Toxic Release Inventory emission indicators to environmental expenditures). Hence, refining the analysis specification in this respect could be an area of contribution. Another point that attracts my attention is the possibility of alternative interpretations of the results. A case in point is the conclusion that CEM delivers weaker impacts on market-based measures than on accounting-based measures. Another possible hypothesis to explain the observation is due to the different time horizons embedded in marketand accounting-based measures. This is perhaps due to the time horizon used by existing studies. Market indicators are based on expectations rather than results, which some of the CEM proxies tend to measure. Hence, long before the impact is evident through accounting numbers, the associated competitive advantage, if any, has already been pre-empted by market anticipations. Hence, to fully account for the impact of CEM activities on market-based performance measures, perhaps it is necessary to see how the market responds when the information of CEM becomes available to the public rather than when the outcome is delivered. Event-study technology may be useful in this respect to discriminate the alternative interpretations. Finally, to reach more meaningful empirical studies, theoretical model formalisation could be very important. In quantitative capital market research, well-formalised theoretical models, which clearly channel various factors to the dependent variable mathematically, often guide the structures of the design of empirical models, reduce the ambiguity of interpretations of results, and pre-indicate the direction of causality (e.g. one might argue that the association found between CEM and CFP is due to the fact that financially strong companies can better afford CEM activities, which reverses the causality adopted by the author’s interpretation).