This study examines the effect of target-and-incentive-consistency of unexpected positive earnings news on investors’ use of corporate social responsibility (CSR) performance information in their pricing decisions.
A 2 × 2 full factorial between-participants experiment is conducted.
Target-and-incentive-consistency of unexpected positive earnings news moderates the effect of CSR performance on investors’ pricing decisions.
Its findings shed insights on investors’ use of a mix of CSR, financial and governance information, support the financial information elasticity effect and add to the effect of financial information on investors’ use of nonfinancial information.
The effect of inelastic financial information in mitigating the CSR information effect can benefit investors who do not plan to use a CSR investment strategy. Knowledge of investors’ conditional use of CSR information can benefit firm managers and policy makers.
Its findings support a heretofore unexamined theoretical underpinning for the effect of financial information on investors’ use of nonfinancial information.
