Corporate social responsibility, diversity, and corporate communication : natural language processing and machine learning approaches

Abstract

In the second chapter, we rely on collaborative intelligence, which combines human and artificial intelligence (i.e., supervised machine learning), to construct a textual feature that measures firmlevel gender diversity talk (GDT), as reflected in the share of gender diversity discussion in the narrative of quarterly earnings conference calls. We show that the MeToo movement, an unequivocal social movement shock, led to a significant increase in GDT. We however document positive short-term stock market reaction to GDT during the first post-MeToo quarter, indicating that GDT is, on average, perceived by investors as value-relevant. We also show that post-MeToo, high-GDT firms engage in less substantive female-friendly initiatives, indicating that firms do not walk the talk of gender diversity.<br> In the third chapter, using industry-relevant documents and the most-cited CSR/ESG papers to develop a new CSR dictionary, we show that the COVID-19 incentivized firms to engage in overselling of their CSR. We find that more CSR talk during COVID translates into value depression, indicating that investors, on average, do not perceive CSR overselling as value-relevant. Our evidence suggests that firms do not walk their CSR talk and that CSR Talk is positively (negatively) associated with the use of positive (negative) words. Our evidence suggests that ‘cheap talk is not cheap’.<br> In the fourth chapter, we use Natural Language Processing to measure supply chain risk (SCR) faced by US firms, as expressed in narratives of quarterly earnings conference calls. We show that exposure to SCR reached unprecedented levels during COVID-19. The effect of COVID-19 on SCR is more pronounced in firms with a greater dispersion of analyst forecasts, increased complexity, and more financial constraints. We document a negative effect of SCR on conference call short-term returns and future profitability. High-SCR firms are also associated with longer cash conversion cycles and more ESG overselling.