||Exploring the Association between British Companies' CSR Performance and Financial Performance-Using the Information Content of CSR Reports as a Mediator
||Graduate Institute of Finance
Corporate Social Responsibility Performance
This study investigates the relation between the CSR performance, CSR report sentiments and firm’s financial performance, and the mediating effect from CSR report sentiments. CSR tends to improve firms’ reputation and obtain trust from investors, and causes a positive impact on firms’ financial performance. CSR reports is a way for investors to know the firms’ behaviors, and the sentiments on it are informative, which could affect the investors’ valuation of firms. Based on the samples from UK listed firms for the period 2004-2018, our empirical results show that CSR performance has a positive impact on CSR report sentiments and market performance separately. In addition, the relation between CSR report sentiment and financial performance is positive. Besides, CSR report sentiments have a mediating effect on the relation between CSR performance and market performance. The results imply that the CSR report sentiments is informative, which may positively affect the investors’ perception of the firms’ market value, which further results in better market performance.
List of Tables v
List of Figures vi
1. Introduction 1
1.1 Background 1
1.2 Motivation and Purpose 3
1.3 Research Structure 4
2. Literature Review and Hypothesis Development 5
2.1 CSR Performance and Firms’ Financial Performance 5
2.2 Text Mining Techniques and CSR Report 6
2.3 CSR Report Sentiment and Financial Performance 8
2.4 CSR Performance and CSR Report Sentiment 9
2.5 CSR Report Sentiment’s Role of Mediator 10
3. Data and Methodology 11
3.1 Data Source and Data Pretreatment 11
3.2 Classifications of Sentiment on Sentences 14
3.3 Deep Learning Model 16
3.4 Measurement of Sentiments Prediction 20
3.5 Research design 21
4. Empirical results 29
4.1 Descriptive Statistics 29
4.2 Test of Hypothesis 1 35
4.3 Test of Hypothesis 2 39
4.4 Test of Hypothesis 3 41
4.5 Test of Hypothesis 4 44
4.6 Further Research 49
5. Conclusion 53
List of Tables
Table 1 Summary of Sample 12
Table 2 Example of Sentence Segment 12
Table 3 Example of Word Segment 13
Table 4 Emotional Words on ANEW 13
Table 5 Example of Emotional Words on the Sentence 13
Table 6 Example of Sentence Sentiment Labeling 15
Table 7 Descriptive Statistics for the Sentiment of Labeled 2000 Sentences 15
Table 8 Hyperparameters Configuration after Adjustment 19
Table 9 Average MSEs of 10 Cross-validation 20
Table 10 Data Summary 20
Table 11 Detail of ESG Scores Calculation 23
Table 12 Summary of Variables 27
Table 13 Descriptive Statistics 31
Table 14 Correlation Matrix (1) 33
Table 15 Correlation Matrix (2) 34
Table 16 Test of Hypothesis 1 (Tobin’s Qt as dependent variable) 37
Table 17 Test of Hypothesis 1 (Tobin’s Qt+1 as dependent variable) 38
Table 18 Test of Hypothesis 2 (CSR report sentiments in year t as dependent variable) 40
Table 19 Test of Hypothesis 3 (Tobin’s Qt as Dependent variable) 42
Table 20 Test of Hypothesis 3 (Tobin’s Qt+1 as Independent variable) 43
Table 21 Test of Hypothesis 4 (Tobin’s Qt as dependent variable) 45
Table 22 Test of Hypothesis 4 (Tobin’s Qt+1 as dependent variable) 47
Table 23 Test of Change Model (Tobin’s Qt as dependent variable) 50
Table 24 Results of Sobel Test 52
List of Figures
Figure 1 Valence and Arousal 14
Figure 2 GRU-CNN Model 17
Figure 3 Values of Valence after Shifted 21
Figure 4 Direct Effect Model 22
Figure 5 Mediating Effect Model 22
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