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Assessing social and environmental performance through narrative complexity in CSR reports

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  • Nazari, Jamal A.
  • Hrazdil, Karel
  • Mahmoudian, Fereshteh

Abstract

We analyse the relationship between the complexity of corporate social responsibility (CSR) disclosure and actual CSR performance, and postulate a positive association between actual CSR performance and readability and the size of CSR disclosure documents. Using several readability and disclosure size measures from computational linguistics, we test our hypotheses using a cross-sectional sample of stand-alone CSR reports issued by large U.S. companies. We find that increased CSR disclosure and more readable CSR reports are associated with better CSR performance. Our findings suggest that extending CSR disclosure increases transparency regarding firms’ social and environmental performance, while using less-readable language in CSR reports increases obfuscation. This study contributes to the disclosure literature by documenting that the complexity indices that have been used as measures of obfuscation in prior finance and accounting research can help shareholders, financial analysts, and investors determine the credibility of CSR disclosure.

Suggested Citation

  • Nazari, Jamal A. & Hrazdil, Karel & Mahmoudian, Fereshteh, 2017. "Assessing social and environmental performance through narrative complexity in CSR reports," Journal of Contemporary Accounting and Economics, Elsevier, vol. 13(2), pages 166-178.
    • Handle: RePEc:eee:jocaae:v:13:y:2017:i:2:p:166-178
    DOI: 10.1016/j.jcae.2017.05.002
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    More about this item

    Keywords

    Corporate social responsibility (CSR); CSR disclosure; CSR performance; Readability; Voluntary disclosure; Social performance; Environmental performance;
    All these keywords.

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

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