Causal Effect of Analyst Following on Corporate Social Responsibility

48 Pages Posted: 21 Aug 2016

See all articles by Binay Adhikari

Binay Adhikari

University of Texas at San Antonio

Date Written: August 19, 2016

Abstract

I examine the influence of sell-side financial analysts on corporate social responsibility (CSR), and find that firms with greater analyst coverage tend to be less socially responsible. To establish causality, I employ a difference-in-differences (DiD) technique, using brokerage closures and mergers as exogenous shocks to analyst coverage, as well as an instrumental variables approach. Both identification strategies suggest that analyst coverage has a negative causal effect on CSR. My findings are consistent with the view that spending on CSR is a manifestation of an agency problem, and that financial analysts curb such discretionary spending by disciplining managers.

Keywords: Analyst following, Monitoring, Corporate social responsibility (CSR)

JEL Classification: D21, G24, M14

Suggested Citation

Adhikari, Binay Kumar, Causal Effect of Analyst Following on Corporate Social Responsibility (August 19, 2016). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2826675

Binay Kumar Adhikari (Contact Author)

University of Texas at San Antonio ( email )

1 UTSA Circle
San Antonio, TX 78249
United States
2104585349 (Phone)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
204
Abstract Views
968
Rank
269,874
PlumX Metrics