Forecasting price delay and future stock returns: The role of corporate social responsibility

This paper investigates the role of corporate social responsibility (CSR) performance in forecasting companys' stock prices and future returns. The forecasting analysis identifies a negative association between CSR performance and proxies of price delay. The negative CSR-delay association is weak for state-owned enterprises (SOEs) because of their politically oriented motivation of CSR activities, but significantly strong for non-SOEs. Furthermore, we find that forecasting delayed firms is expected to have higher future returns. In particular, the returns premium is most attributable to the CSR component of delay, compared with the non-CSR component. Taken together, these results suggest that CSR performance plays a positive role in enhancing stock price efficiency, and a potential explanation is that CSR performance can be considered as additional information for equity predictions.