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Do socially responsible firms provide more readable disclosures in annual reports?

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  • Walid Ben‐Amar
  • Ines Belgacem

Abstract

This paper examines the relationship between the adoption of corporate social responsibility (CSR) practices and the syntactic complexity of the management's discussion and analysis (MD&A) section of the annual report. Based on stakeholder and agency perspectives, we offer an empirical test of two competing hypotheses. First, we may expect socially responsible firms to provide transparent disclosures because this reflects a firm's commitment to high ethical standards. In contrast, the agency perspective predicts that managers engage in CSR for self‐interest purposes and that CSR‐oriented firms will be more likely to attempt to mislead stakeholders about the firm's actual performance through complex narrative disclosures. Based on a sample of large firms listed on the Toronto Stock Exchange, our results show a positive association between corporate social performance and the MD&A's textual complexity. Consistent with the agency perspective, our findings suggest that managers may engage in CSR opportunistically and use complex narrative disclosures in an impression management strategy.

Suggested Citation

  • Walid Ben‐Amar & Ines Belgacem, 2018. "Do socially responsible firms provide more readable disclosures in annual reports?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 25(5), pages 1009-1018, September.
    • Handle: RePEc:wly:corsem:v:25:y:2018:i:5:p:1009-1018
    DOI: 10.1002/csr.1517
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    6. Meng‐Feng Yen & Yung‐Ming Shiu & Chi‐Feng Wang, 2019. "Socially responsible investment returns and news: Evidence from Asia," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(6), pages 1565-1578, November.
    7. James Costantini & Kyoka Costantini, 2022. "Communications on Sustainability in the Apparel Industry: Readability of Information on Sustainability on Apparel Brands’ Web Sites in the United Kingdom," Sustainability, MDPI, vol. 14(20), pages 1-10, October.
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    9. Ebenezer K. Lamptey & Jin Dong Park & Isaac Bonaparte, 2023. "Does Corporate Social Responsibility Affect the Timeliness of Audited Financial Information? Evidence from “100 Best Corporate Citizens”," JRFM, MDPI, vol. 16(2), pages 1-21, January.
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