Do Investors And Analysts Value CSR Reports Modification?

China is in an important period of economic transformation.Corporates’ social responsible behaviors will help build a harmonious society and promote sustainable development of economy.In this context,as a bridge for companies to communicate social responsibility performance with outsiders,great emphasis has been attached to corporate social responsibility disclosure.In Chinese markets,corporate social responsibility information is disclosed in the form of annual corporate social responsibility reports(CSR reports),and managers have great discretion in determining report content.Therefore,it is possible that managers will use the CSR reports as a tool for image management,resulting the lack of informative of CSR reports.The question that whether CSR reposts provide information increments for the capital market is worth discussing.This paper tries to prove the informativeness of CSR reports by examining whether investors and analysts value the CSR reports modification.Textual analysis is used to measure the degree to which the CSR report differs from the previous disclosure.Using a sample of Chinese publicly listed firms,this paper finds that market has a positive reaction of CSR modification.This paper also finds that analyst forecast revision is positively related to CSR modification and that analyst forecast error and dispersion is negatively related to CSR modification.Additional analyses demonstrate that analysts’forecast errors are mainly manifested as optimistic forecast errors.CSR modification reduces analysts’ optimistic forecast errors,but may not have significant effect on analysts’ pessimistic errors.However,the different result may be driven by the difference in sample size.This paper does not find convincing evidence that CSR mandate affects market’s and analysts’ reactions to CSR modification,proving the usefulness of mandate CSR report.Overall,this paper proves that investors and analysts value the standalone CSR reports modifications.Both mandatory and voluntary CSR reports are informative in Chinese financial markets.Collectively,these findings have important implications for academics and practitioners in understanding the function of CSR disclosure in Chinese financial markets.