Korea Trade Review (무역학회지)

Korea Trade Research Association (한국무역학회)
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The Impact of Analyst Expectations and Coverage on CSR Engagement of U.S. Firms

미국기업의 CSR 활동에 애널리스트가 미치는 영향에 관한 연구

  • Ahn, He Soung (Department of International Business and Trade, College of Business Administration, Myongji University) ;
  • Kang, Il Joo (School of Business, Singapore University of Social Sciences)
  • Received : 2021.04.10
  • Accepted : 2021.04.28
  • Published : 2021.04.30
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Abstract

Despite the numerous advantages that CSR engagement can potentially offer, top managers may not always be willing to invest in CSR as they are expected to meet expectations of external constituents in the short run. Given that financial analysts' expectations are important short-term performance targets that top managers are motivated to meet, this study examines how performance relative to earnings forecasts issued by analysts affect top managers' decisions about CSR engagement. Using a sample of publicly listed U.S. firms from 2000 to 2016, we find that top managers are more likely to reduce discretionary expenditure on CSR activities as performance falls below analyst forecasts to improve financial performance in the following fiscal year. As performance exceeds analyst forecasts, top managers are motivated to reduce CSR investments in order to meet higher expectations of analysts. As financial analysts closely monitor the firms that they follow in order to publish investment advice to market participants, we find that analyst coverage weakens top managers' incentive to reduce CSR engagement. Overall, this research sheds meaningful insight into the contextual background in which the top managers are situated in when they make decisions on CSR engagement.

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References

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