Are narrative CSR disclosures relevant for investors? Empirical evidence from Germany

CSR disclosures relate to the provision of information on companies’ environmental and social performance to external stakeholders. Although such disclosures can be directed at several stakeholders other than the (potential) firm shareholders, they may be relevant for valuation purposes. Based on the global reporting initiative (GRI) guidelines, we use content analysis to assess the value relevance of CSR disclosures of 130 German companies over 4 years. Germany is an interesting setting as CSR disclosures are mostly voluntarily, even though the institutional environment appears sensitive to CSR disclosures. Our results show that CSR information is value-relevant, but the value relevance of CSR information differs amongst CSR categories. Specifically, the disclosure of social (i.e. employee-related) information is positively associated with firm value yet environmental disclosures are not. Our results confirm that management should be aware of the potential capital market effects of voluntary CSR disclosures, even though they are not directed at shareholders as such.