Corporate Social Performance and Firm Value: The Role of Analysts.

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It remains a discussion whether excelling in social responsibility initiatives hurts or benefits a firm financially. This study takes an agency and stakeholder perspective to examine the relationship between corporate social performance (CSP) and firm value. It uses a refined method to measure CSP and incorporates the role of analysts. Specifically this study incorporates a moderating role of analyst coverage, which analyses whether firms that perform socially responsible and are followed by many (few) analysts have a higher (lower) firm value. In addition, a mediating role of analyst recommendations is investigated. Security analysts incorporate corporate social performance information in their recommendations, which serves as an informational pathway to investors. The data sample consists out 5031 firm-year observations of 45 countries during the period 2011-2017. The results show a positive significant relationship between CSP and firm value, which is moderated by analyst coverage. The mediating role of analyst recommendations is not significant. This study highlights the important role of analyst coverage as a governance mechanism in the relationship between CSP and firm value. Keywords: Corporate Social Performance, Firm Value, Analyst Coverage, Analyst Stock Recommendations
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