Corporate social responsibility reporting and value relevance of the banking sector in Bangladesh

Abstract

Using a sample of listed Bangladeshi banking companies for the period 2009–2017, this study investigated whether these banks which disclosed superior CSR information are more valued by the investors. CSR reports can also affect market value of equity because the sustainability report may be observed by the market participants to be a basis of supplementary and corresponding evidence along with the customary value-relevant accounting variables. Finally, this study also analyses whether CSR disclosure by Islamic banks operating in banking industries is considered in a different way by investors than CSR disclosure by conventional banks. By using a modified Ohlson model, it is evident that CSR disclosure does have noteworthy positive influence on stock prices. Furthermore, CSR disclosure by Islamic banks is associated with higher market valuations than CSR disclosure by conventional banks. The reason behind the fact is that higher CSR information assists market participants to access the inherent risk associated to potential legal action and impending obligations, by this means sinking information asymmetries and the threat of adverse selection.