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Analyst forecast quality and corporate social responsibility: the mediation effect of corporate governance

Yuan George Shan (Department of Accounting and Finance, UWA Business School, The University of Western Australia, Perth, Australia)
Joey Wenling Yang (Department of Accounting and Finance, UWA Business School, The University of Western Australia, Perth, Australia)
Junru Zhang (School of Business and Law, Edith Cowan University, Perth, Australia)
Millicent Chang (School of Accounting, Economics and Finance, University of Wollongong, Wollongong, Australia)

Meditari Accountancy Research

ISSN: 2049-372X

Article publication date: 8 February 2022

Issue publication date: 8 May 2023

591

Abstract

Purpose

This study aims to examine the mediating role played by corporate governance (CG) in the relationship between corporate social responsibility (CSR) and analyst forecast quality.

Design/methodology/approach

The authors raise three specific questions: Does CG play a mediating role in the relationship between CSR and analyst forecast quality? If so, is such mediation effect of CG reduced for firms with weak governance? Do firms with superior CSR performance experience higher analyst forecast quality through the mediation effect of CG?

Findings

The present results suggest that CG serves as a partial mediator that facilitates CSR’s positive influence on analyst forecast quality. However, further analyses show that in firms with a low governance score, CG does not have a mediation effect. Conversely, the authors find that firms with superior CSR performance have higher forecast quality through the mediation effect of CG. The authors also find that the mediation effect of CG is more pronounced for the environmental component than for the social component of CSR.

Originality/value

To the best of the authors’ knowledge, this study is the first to investigate the role of CG as a mediator between CSR and analyst forecast quality and to reveal that the strength of this effect varies depending on firms’ CG level and CSR commitment.

Keywords

Acknowledgements

JEL Classification – G34, M14, M41Conflict of interest: The authors declare no conflict of interest.

The authors are grateful to the Associate Editor Professor Nathan Joseph of Meditari Accountancy Research and anonymous reviewers for their constructive comments and suggestions on earlier versions of this paper. We also acknowledge the constructive comments on earlier versions of this paper received from seminar participants at School of Accounting, Economics, and Finance, Curtin University.

Citation

Shan, Y.G., Yang, J.W., Zhang, J. and Chang, M. (2023), "Analyst forecast quality and corporate social responsibility: the mediation effect of corporate governance", Meditari Accountancy Research, Vol. 31 No. 3, pp. 675-705. https://doi.org/10.1108/MEDAR-02-2021-1200

Publisher

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Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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