Corporate Social Responsibility and Analyst’s Target Price

This paper investigates the extent to which corporate social performance is associated with financial analyst forecast optimism. I hypothesize that the degree of CSR activities relates to the forecast optimism of one-year-ahead earning and target price. Using the sample of U.S. firms from 2005 to 2018, I find the analysts estimate the short-term earnings and target price more optimistically when the firms increase the corporate social responsibility activities. This study contributes to the CSR literature by shedding light on the effect of CSR performance on the analysts’ perception during the valuation process, which eventually affects target stock price forecasts. This study makes a contribution to the analyst forecast optimism literature by empirically testing the CSR engagement on short-term and long-term forecast via sales forecast and operating income forecast optimism.