Do sustainability reporting standards affect analysts' forecast accuracy?

Simone Pizzi

doi:10.1108/SAMPJ-04-2023-0227

2024-01-09

PRE

Simone Pizzi *

Fabio Caputo

Elbano de Nuccio

DOI：10.1108/SAMPJ-04-2023-0227

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PurposeThis study aims to contribute to the emerging debate about materiality with novel insights about the signaling effects related to the disclosure of environmental, social and governance (ESG) information using the guidelines released by the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB).Design/methodology/approachAn empirical assessment using panel data analysis was built to evaluate the relationship between sustainability reporting standards and analysts' forecast accuracy.FindingsThe analysis revealed that the proliferation of sustainability reports prepared on mandatory or voluntary basis mitigated the signaling effects related to the disclosure of ESG information by companies. Furthermore, the additional analysis conducted considering sustainability reporting quality and ESG performance revealed the existence of mixed effects on analysts' forecasts accuracy. Therefore, the insights highlighted the need to consider a cautionary approach in evaluating the contribution of ESG data to financial evaluations.Practical implicationsThe practical implications consist of identifying criticisms related to disclosing ESG information by listed companies. In detail, the analysis underlines the need to enhance reporting standards' interoperability to support the development of more accurate analysis by investors and financial experts.Social implicationsThe analysis reveals increasing attention investors pay to socially responsible initiatives, confirming that financial markets consider sustainability reporting as a strategic driver to engage with stakeholders and investors.Originality/valueThis research represents one of the first attempts to explore differences between GRI and SASB using an empirical approach.

Keyword:

Global Reporting Initiative

Sustainability Accounting Standards Board

Materiality

Forecast accuracy

Interoperability