The Impact of Non-financial Reporting on Stock Price: A Case Study of Romanian and Bulgarian Listed Companies

Corporate Social Responsibility (CSR) has greatly increased in practical relevance once the non-financial and diversity reporting came into force. One of the objectives of the Directive which regulates this obligation is to ensure the alignment of the importance of CSR actions and their transparent communication by public interest companies in all Member States of the European Union. Additional efforts in this respect are expected from companies in the Central and Eastern European countries, where the CSR communication rate is still well below the Western European level. Taking this into consideration, the research in this chapter is a preview of the degree of communication of CSR information by companies listed on the Bucharest Stock Exchange in Romania and on the Sofia Stock Exchange in Bulgaria. The research method used was the content analysis and we studied the information published on the official websites of 521 listed companies in the two Eastern European countries in 2017. In order to eliminate the risk of subjectivity, the criteria for content analysis were represented by the five thematic areas recommended by the European Commission in the Non-Financial Reporting Guide. The Degree of communication of CSR information by companies in the two countries (DCSR = 27.1% for Romanian companies and DCSR = 17.2% for Bulgarian companies) was determined. The comparative analysis between countries was duplicated by the sector activity analysis. For companies that reported CSR information, the analysis was continued with the identification of the specific type of published CSR information, according to the five recommended thematic areas. The Corporate Social Responsibility Index was calculated as a measure of the degree of detail of the CSR information and its influence on the price of the shares of the companies was analysed. The Pearson Coefficient level indicated a lack of correlation for Romanian companies, and a direct correlation for Bulgarian companies. The linear regression model generated by Bulgarian companies suggests that for each additional thematic area for which they report information, companies are hoping for an average 26.18% increase in their stock price.