Corporate Social Reporting in European Banks: The Effects on a Firm's Market Value

ABSTRACT Despite the increasing level of interest in CSR issues, it is not yet clear what real value the market assigns to social reporting. By applying the value relevance analysis to a sample of 130 European‐listed banks, the present work proposes a key to understanding the relationship between social reporting and the value that the market attributes to banks that publicize their commitment to CSR through social reporting. The analysis for the entire sample does not provide evidence that investors attribute value relevance to social reporting (i.e. there is not a significant correlation between the publication of a social report and the stock price). Cross‐country analysis shows that in some countries the social report is value‐relevant, and positively affects the stock price; in others it remains value‐relevant but negatively affects the stock price. Our findings could have several implications for banks, investors, and policymakers. Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment.