Nonfinancial Disclosure and Analyst Forecast Accuracy: International Evidence on Corporate Social Responsibility (CSR) Disclosure

We examine the relationship between nonfinancial transparency and analyst forecast accuracy using firm-level data from 24 countries. We use the issuance of standalone corporate social responsibility (CSR) reports as a proxy for the availability of a comprehensive set of nonfinancial information related to social issues. Our empirical analyses reveal that the presence of CSR reports is associated with a significantly lower level of analyst forecast error. Such a relationship is stronger among countries that are more stakeholder-oriented, where social performance is likely to have a greater impact on firm financial performance. The relationship is also stronger among firms and countries with more opaque financial disclosure, suggesting that social disclosure plays a role complementary to financial transparency. The results hold after we control for various factors related to firm financial transparency. Our findings have important implications for both academics and practitioners in understanding the role played in financial markets by social disclosure, which is increasingly common in recent years.