Assurance of CSR and Analyst Behavior
Globally, firms are increasingly publishing corporate sustainability (CSR) reports and there has been an increase in companies demanding assurance on their CSR reports. This study seeks to understand the benefits of CSR assurance on analyst behavior. Using a sample of 521 publicly-listed firms (from 21 European countries) that produced CSR reports between 2011-2015, a multilevel panel data regression is used to examine the effect of voluntary external assurance of CSR reports on analyst behavior. Analyst behavior includes analyst following, measured by the number of analysts following a firm, and analyst forecast accuracy, measured by the forecast error. The results show a positive relationship between assurance of CSR reports and analyst following. When looking at assurance-specific characteristics, the results indicate a positive relationship between assurance providers from the Big Four and analyst following. Looking at analyst forecast accuracy, the findings show support for a higher forecast accuracy when CSR reports are assured. This effect is only significant for forecasts made for one-year ahead. The assurance-specific characteristics are not relevant for analyst forecast accuracy.
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