Corporate Social Responsibility Reporting and Its Influence on Firm Value

Abstract

This study investigates the nuanced relationship between Corporate Social Responsibility (CSR) reporting and firm value, moving beyond traditional linear models to
propose a novel, threshold-based framework. While extant literature predominantly
examines CSR as a monolithic construct with uniform financial implications, this research posits that the value relevance of CSR reporting is contingent upon a firm’s
strategic positioning and the materiality of its disclosed activities. We introduce the
concept of ’Strategic CSR Congruence’—the alignment between a firm’s core business
operations and its reported CSR initiatives—as a critical moderating variable. Utilizing a hand-collected dataset of 450 publicly traded firms from 1998 to 2004, we
employ a multi-method approach combining content analysis of CSR reports, financial statement data, and market valuation metrics. Our methodology innovatively
applies latent class analysis to categorize firms based on their CSR reporting profiles,
rather than relying on aggregate scores. The results reveal a non-linear, inverted Ushaped relationship between the extensiveness of CSR reporting and Tobin’s Q. Firms
demonstrating high Strategic CSR Congruence experience significant positive market
reactions, whereas firms with extensive but incongruent reporting exhibit a valuation
discount. Furthermore, we identify a reporting threshold; beyond a certain point of
detail, particularly on non-material social and environmental issues, additional disclosure correlates with declining investor confidence, suggesting information overload or
skepticism. This research contributes a more granular, contingent theory of CSR value
relevance, challenging the prevailing ’more is better’ disclosure paradigm and offering
managers a strategic framework for prioritizing material CSR communication.