The Value Relevance of Social Reporting: Evidence from Listed Italian Companies

This paper aims to test whether the publication of a social report provides information about the firm’s market value. We want to understand if investors believe the social report has a role equal to that traditionally attributed to accounting variables, i.e., whether the social report is value-relevant in assessing a firm’s market value. This paper is deductive. It tests two main hypotheses: first, the social report is value relevant because it explains firm value; second, the social report influences the value-relevance of accounting variables. The study applies the value-relevance analysis on a sample of 178 Italian companies listed on the Milan Stock Exchange. The estimates show a significant negative correlation between the publication of a social report and the stock price. Furthermore, book value per share accounting information is more relevant for the companies that publish a social report, whereas the relevance of earnings per share does not change for these companies. This paper increases the understanding of the value that markets assign to the social report. It contributes to enrich the literature on the value-relevance analysis applied to non-financial variables and to social report in particular. JEL Classification: M14, M41, G15