We received an interesting statistic today from Tracey Rembert at CERES about the benefits of voluntary disclosure of CSR.  She informed us that in the upcoming paper Voluntary Non-Financial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting (The Accounting Review), it was found that reduction in the cost of equity capital could be a potential benefit of voluntarily reporting on CSR activities.

More specifically, it was found that the likelihood of firms voluntarily reporting on CSR activities is associated with a higher prior year cost of equity capital.  Firms with superior CSR performance to their peers have a reduction in the cost of their equity capital after issuing CSR reports, and these firms also attract more dedicated institutional investors and analyst coverage; these analysts in turn have lower absolute forecast errors and dispersion. 

Lastly, the paper found that these firms are more likely than non-disclosing firms to conduct SEOs to raise capital in the 2 years following the CSR disclosure.  These same firms raise significantly more equity capital than non-reporters.

These interesting statistics were taken from Voluntary Non-Financial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting, which will run in the next issue of The Accounting Review.  What do you think of these stats? Are you surprised and/or do they seem accurate? Discuss!