Given current EU and UK regulatory interest in environmental and social disclosures, we analyse the relationships between the levels of environmental and social disclosures in the UK and analyst following. We do so to investigate the general value relevance of such disclosures.
In our preferred modelling specification, we find that analyst following is cross-sectionally, but not dynamically, related to the levels of either one year-ahead environmental or social disclosures. Further, we also find that the levels of either environmental or social disclosures are cross-sectionally, but not dynamically, related to one year-ahead analyst following.
The findings with respect to social disclosure levels are not as robust to key changes in model specification as those for environmental disclosure levels. We conclude that environmental disclosures generally provide value relevant information, with some evidence also suggesting the same for social disclosures.
By: Cristiana Bernardi, Roma TRE University, and Andrew W. Stark, University of Manchester – Manchester Business School
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