The Impact of Corporate Sustainability Reporting on Investor Decisions

Abstract

This essay provides a focused discussion on the influence of corporate sustainability reporting (CSR) on investment decisions undertaken by investors. Businesses nowadays operate in a modern global economy marked by the evolving trends in governance. Corporate sustainability reporting is a pivotal aspect of modern corporate behavior, playing a critical role in the creation and delivery of long-term corporate value. Appropriate behavior is a necessary aspect of corporate governance that can deliver benefits to the corporation’s long-term sustainability. The aim of this essay is to examine if there is a statistically significant relationship between increased levels of CSR disclosure, considered as behavior, by corporations and changes in investor behavior as measured by stock price. The paper tries to explore the following hypothesis: there is a positive relationship between incremental CSR disclosure by corporations as measured by changes in the G3.1 index and changes in investor behavior, defined as either changes in stock price or changes in trading volume. Survey on AGL, NAB, MBL and WBC are analyzed and employs Ordinary Least Squares and logistic regression techniques to evaluate these hypotheses. In contemporary times, the business place has changed a lot. The approach to business now holds corporate governance that focuses on the behavior of the organization in exploiting the interests of stakeholders. It involves a wide range of obligations towards stakeholders, such as the environment and profits. In a modern global economy with increasing international arbitration, the behavior of businesses is influenced by governance trends that are constantly evolving. The success of companies is not only measured by the economic benefit but also by the company’s ethical and sustainable behavior.  Companies worldwide made significant sustainability initiatives in response to global economic, environmental, and partnership issues. This prompted stakeholders to be increasingly attentive to the sustainability activities undertaken by the corporation. As a result, there has been an increase in the number of corporations involved in CSR as stakeholders become more vigilant and sustainable behavior is promoted mainly among firms soliciting external financing. Hence, there is a need to discover and analyze the essential links between business behavior and these sustainable activities, known as CSR.

Keywords: Corporate Sustainability Reporting, Investor Decisions, Stock Price, Governance, Stakeholders, CSR Disclosure, Trading Volume, Long-term Value.