Latent semantic analysis of corporate social responsibility reports (with an application to Hellenic firms)

We propose a novel and objective statistical method known as latent semantic analysis (LSA), used in search engine procedures and information retrieval applications, as a methodological alternative for textual analysis in corporate social responsibility (CSR) research. LSA is a language processing technique that allows recognition of textual associative patterns and permits statistical extraction of common textual themes that characterize an entire set of documents, as well as tracking the relative prevalence of each theme over time and across entities. LSA possesses all the advantages of quantitative textual analysis methods (reliability control and bias reduction), is automated (meaning it can process numerous documents in minutes, as opposed to the time and resources needed to perform subjective scoring of text passages) and can be combined in mixed-method research approaches. To demonstrate the method, our empirical application analyzes the CSR reports of Hellenic companies, and first testifies that eight (five) recurring and common textual themes can explain about 50% (40%) of the variation in their CSR reports. We further establish—via cross-sectional regression with selection—that the identified themes have a statistically significant effect on reporting firms’ return-on-assets (ROA), even after controlling for factors known to explain the cross-sectional variation in ROA and the self-selectivity of firms that engage in CSR practices.

[1]  Rafael Lucian,et al.  CSR Information Disclosure on the Web: A Context-Based Approach Analysing the Influence of Country of Origin and Industry Sector , 2008 .

[2]  Feng Li.  Annual Report Readability, Current Earnings, and Earnings Persistence , 2008 .

[3]  Khosro S. Jahdi,et al.  Marketing Communications and Corporate Social Responsibility (CSR): Marriage of Convenience or Shotgun Wedding? , 2009 .

[4]  Taru Vuontisjärvi.  Corporate Social Reporting in the European Context and Human Resource Disclosures: An Analysis of Finnish Companies , 2006 .

[5]  J. Peloza.  The Challenge of Measuring Financial Impacts From Investments in Corporate Social Performance , 2009 .

[6]  Anne Ellerup Nielsen,et al.  Reporting CSR – what and how to say it? , 2007 .

[7]  J. McGuire,et al.  Corporate Social Responsibility and Firm Financial Performance , 1988 .

[8]  Reuven Lehavy,et al.  Analyst Information Discovery and Interpretation Roles: A Topic Modeling Approach , 2016 .

[9]  Tim Loughran,et al.  When is a Liability not a Liability? Textual Analysis, Dictionaries, and 10-Ks , 2010 .

[10]  K. Paul,et al.  Corporate Social Reporting in Mexico , 2006 .

[11]  Bill McDonald,et al.  Textual Analysis in Accounting and Finance: A Survey , 2016 .

[12]  G. Satta,et al.  Corporate governance and the quality of voluntary disclosure: Evidence from medium-sized listed firms , 2015 .

[13]  John Elkington,et al.  The Chrysalis Economy: How Citizen CEOs and Corporations Can Fuse Values and Value Creation , 2001 .

[14]  CSR in metallurgy sector in Greece: A content analysis , 2013 .

[15]  Giovanna Campopiano,et al.  Corporate Social Responsibility Reporting: A Content Analysis in Family and Non-family Firms , 2014, Journal of Business Ethics.

[16]  Terence Cooke,et al.  The impact of culture and governance on corporate social reporting , 2005 .

[17]  J. Mahon,et al.  The Corporate Social Performance and Corporate Financial Performance Debate , 1997 .

[18]  Esther Hennchen.  Royal Dutch Shell in Nigeria: Where Do Responsibilities End? , 2015 .

[19]  Radiah Othman,et al.  Corporate social and environmental reporting: Where are we heading? A survey of the literature , 2009 .

[20]  M. F. Porter,et al.  An algorithm for suffix stripping , 1997 .

[21]  Susan T. Dumais,et al.  Using Linear Algebra for Intelligent Information Retrieval , 1995, SIAM Rev..

[22]  Roel Popping,et al.  Computer-assisted text analysis , 2000 .

[23]  K. Evangelinos,et al.  European perspectives on corporate non-financial disclosure: Evidence from the Southeast , 2014 .

[24]  Tim Loughran,et al.  Textual Analysis in Accounting and Finance: A Survey: TEXTUAL ANALYSIS IN ACCOUNTING AND FINANCE , 2016 .

[25]  F. Schmidt,et al.  Corporate Social and Financial Performance: A Meta-Analysis , 2003 .

[26]  Feng Li.  Textual Analysis of Corporate Disclosures: A Survey of the Literature , 2011 .

[27]  Public interest reports as a medium for corporate disclosure: The case of General Motors , 1996 .

[28]  Muel Kaptein,et al.  The Balanced Company , 2002 .

[29]  Mike Y. Chen,et al.  Yahoo! for Amazon: Sentiment Extraction from Small Talk on the Web , 2001 .

[30]  K. Frazier,et al.  A METHODOLOGY FOR THE ANALYSIS OF NARRATIVE ACCOUNTING DISCLOSURES , 1984 .

[31]  Stephen Lacy,et al.  Analyzing Media Messages , 2019 .

[32]  Stephen V. Brown,et al.  Large-Sample Evidence on Firms’ Year-Over-Year MD&A Modifications , 2011 .

[33]  M. Sillanpää.  The Body Shop Values Report – Towards Integrated Stakeholder Auditing , 1998 .

[34]  C. Deegan,et al.  Do Australian companies report environmental news objectively?: An analysis of environmental disclosures by firms prosecuted successfully by the Environmental Protection Authority , 1996 .

[35]  Francesco Trebbi,et al.  Measuring Central Bank Communication: An Automated Approach with Application to FOMC Statements , 2009 .

[36]  Radiah Othman,et al.  Sustainability Practices and Corporate Financial Performance: A Study Based on the Top Global Corporations , 2012 .

[37]  I. Wong,et al.  Corporate and social performance links in the gaming industry. , 2013 .

[38]  M. Kaptein,et al.  The Balanced Company: A Theory of Corporate Integrity , 2002 .

[39]  Rhonda K. Reger,et al.  A Content Analysis of the Content Analysis Literature in Organization Studies: Research Themes, Data Sources, and Methodological Refinements , 2007 .

[40]  Reza Kouhy,et al.  Social Reporting by Companies Listed on the Alternative Investment Market , 2008 .

[41]  T. Kohers,et al.  The Link Between Corporate Social and Financial Performance: Evidence from the Banking Industry , 2002 .

[42]  Sanjiv Ranjan Das,et al.  Text and Context: Language Analytics in Finance , 2014 .

[43]  Ellyn R. Boukus,et al.  The Information Content of FOMC Minutes , 2006 .

[44]  Peter W. Foltz,et al.  An introduction to latent semantic analysis , 1998 .

[45]  T. Landauer,et al.  Indexing by Latent Semantic Analysis , 1990 .

[46]  Mark Lang,et al.  Textual Analysis and International Financial Reporting: Large Sample Evidence , 2015 .

[47]  M. Milne,et al.  The Uptake of Sustainability Reporting in Australia , 2015 .

[48]  K. Hussainey,et al.  Determinants of CSR disclosure quantity and quality: Evidence from non-financial listed firms in Saudi Arabia , 2016 .

[49]  Randolph P. Beatty,et al.  INVESTMENT BANKING, REPUTATION, AND THE UNDERPRICING OF INITIAL PUBLIC OFFERINGS* , 1986 .

[50]  Stuart Soroka,et al.  Affective News: The Automated Coding of Sentiment in Political Texts , 2012 .

[51]  I. Nikolaou,et al.  An Analysis of Corporate Social Responsibility (CSR) and Sustainability Reporting Assessment in the Greek Banking Sector , 2009 .

[52]  Philip Wallage.  Assurance on Sustainability Reporting: An Auditor's View , 2000 .

[53]  Colm Kearney,et al.  Textual Sentiment in Finance: A Survey of Methods and Models , 2013 .

[54]  Grigoris Giannarakis,et al.  Corporate social responsibility performance in the Greek telecommunication sector , 2011 .

[55]  Meng Zhao.  CSR-Based Political Legitimacy Strategy: Managing the State by Doing Good in China and Russia , 2012 .

[56]  Carol A. Adams,et al.  Internal organisational factors influencing corporate social and ethical reporting: Beyond current theorising , 2002 .

[57]  John Elkington,et al.  Partnerships from cannibals with forks: The triple bottom line of 21st‐century business , 1998 .

[58]  Corporate socially responsible (CSR) practices in the context of Greek industry , 2003 .

[59]  Sayedeh Parastoo Saeidi,et al.  How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction , 2015 .

[60]  Herman Aguinis,et al.  What We Know and Don’t Know About Corporate Social Responsibility , 2012 .

[61]  Dhruv Grewal,et al.  The Effect of Store Name, Brand Name and Price Discounts on Consumers' Evaluations and Purchase Intentions , 1998 .

[62]  T. Yu,et al.  The effects of corporate social responsibility on brand equity and firm performance , 2015 .

[63]  Gene H. Golub,et al.  Singular value decomposition and least squares solutions , 1970, Milestones in Matrix Computation.

[64]  Sven Helin,et al.  Organising Corporate Responsibility Communication Through Filtration: A Study of Web Communication Patterns in Swedish Retail , 2011 .

[65]  Yongqiang Gao.  CSR in an emerging country: a content analysis of CSR reports of listed companies , 2011 .

[66]  Peter Seele,et al.  Quantitative Content Analysis as a Method for Business Ethics Research , 2015 .

[67]  Stergios Leventis,et al.  Corporate social responsibility reporting and organizational stigma: the case of "sin" industries. , 2016 .

[68]  C. Deegan,et al.  A Study of the Environmental Disclosure Practices of Australian Corporations , 1996 .

[69]  Heather E. Canary,et al.  Principles and Influence in Codes of Ethics: A Centering Resonance Analysis Comparing Pre- and Post-Sarbanes-Oxley Codes of Ethics , 2008 .

[70]  G. Bascle.  Controlling for endogeneity with instrumental variables in strategic management research , 2008 .

[71]  P. Thompson,et al.  Corporate Social Responsibility Reporting in Malaysia , 2004 .

[72]  Luis Mateus Rocha,et al.  Singular value decomposition and principal component analysis , 2003 .

[73]  Rajen K. Gupta,et al.  Researches in Corporate Social Responsibility: A Review of Shifting Focus, Paradigms, and Methodologies , 2011 .

[74]  T. Soobaroyen,et al.  A Longitudinal Study of Corporate Social Disclosures in a Developing Economy , 2011 .

[75]  G. Calabretta,et al.  Uncovering the Intellectual Structure of Research in Business Ethics: A Journey Through the History, the Classics, and the Pillars of Journal of Business Ethics , 2011 .

[76]  Alexandros G. Sahinidis,et al.  Exploring Corporate Social Responsibility practices of Greek companies , 2014 .

[77]  Bart Van Looy,et al.  Exploring the feasibility and accuracy of Latent Semantic Analysis based text mining techniques to detect similarity between patent documents and scientific publications , 2010, Scientometrics.

[78]  Zhenzhong Ma,et al.  Most Cited Business Ethics Publications: Mapping the Intellectual Structure of Business Ethics Studies in 2001–2008 , 2012 .

[79]  Kenneth E. Aupperle,et al.  An empirical examination of the relationship between corporate so#al responsibility and profitabilit , 1985 .

[80]  Nikolaos A. Panayiotou,et al.  Greece: A Comparative Study of CSR Reports , 2009 .

[81]  Paul C. Tetlock.  Giving Content to Investor Sentiment: The Role of Media in the Stock Market , 2005, The Journal of Finance.

[82]  Samuel B. Graves,et al.  The corporate social performance-financial performance link , 1997 .

[83]  C. Herzig,et al.  Discourses on corporate social ir/responsibility in the financial sector , 2013 .

[84]  M. Canela,et al.  Does Social Performance Really Lead to Financial Performance? Accounting for Endogeneity , 2010 .

[85]  A. Belal.  A study of corporate social disclosures in Bangladesh , 2001 .

[86]  A. Tsekrekos,et al.  Latent semantic analysis of the FOMC statements , 2017 .

[87]  Stephen. Pavelin,et al.  Corporate Reputation and Social Performance: The Importance of Fit , 2006 .

[88]  Werner Antweiler,et al.  Is All that Talk Just Noise? The Information Content of Internet Stock Message Boards , 2001 .

[89]  J. Heckman.  Sample selection bias as a specification error , 1979 .