Social Report and Stock Prices.Empirical Evidence from the European Banking Sector

This paper aims to test whether the publication of a social report provides information about the firm’s market value. The study applies value-relevance analysis to the social reporting variable on a sample of 130 European listed banks in order to understand whether investors believe that the social report plays a role equivalent to that traditionally attributed to accounting variables. The estimates for the entire sample demonstrate an insignificant correlation between the publication of a social report and the stock price. We can therefore conclude that investors do not attribute a value-relevant to social report. The cross-country analysis shows that national realities are very different. In some countries, the social report is seen as value-relevant and positively affects the stock price; in other countries, the social report remains value-relevant but negatively affects the stock price. This paper increases the understanding of the value that markets assign to social report. It contributes to enrich the literature on value-relevance analysis applied to non-financial variables and social report in particular.