CSR Goal Disclosures and Regulatory Mandates: The Role of Investors’ Perceptions of Greenwashing

Abstract

As stakeholder demand for CSR information continues to grow, regulators are considering ways to improve the consistency, comparability, and reliability of corporate CSR disclosures. Utilizing an experiment, we examine how disclosure of CSR goals influences investors’ responses to subsequent CSR performance disclosures under different regulatory regimes. We find evidence that the type of CSR goal disclosure causes investors to react differently to identical CSR performance information, and that this effect is moderated by the regulatory reporting regime. Although high quantitative CSR goals are frequently encouraged to incent higher CSR performance, we find that investors’ perceptions of greenwashing are higher, and in turn, their investment willingness is lower after viewing identical CSR performance information for a company that initially issues a relatively high quantitative goal compared to a relatively low quantitative goal or qualitative goal. We also find that the observed effects of quantitative CSR goals are magnified by mandatory (compared to voluntary) regulatory reporting regimes. Our findings have important implications for investors, managers, as well as to regulators who are currently considering changes to CSR disclosure requirements.