Voluntary Fair Value Disclosures Beyond SFAS 157’s Three-Level Estimates

Recent CSR literature emphasize that firms benefit the most from strategic CSR, by customizing their CSR practices based on unique firm strategies and operations. On the other hand, as CSR’s effect on firm value is generally indirect through its influence on stakeholder attitude and firm reputation, adopting strategic CSR only create value if it is appreciated by stakeholders, including the public and investors. With the presence of information asymmetry, gaining legitimacy may be critical in order to draw attention and meet expectations of general public, investors, and analysts. Gaining legitimacy, however, is generally associated with conforming to standard practices, which is often at odds with customizing CSR practices based on unique firm feature. Thus there might be some tension between engaging in strategic CSR and adopting CSR practices that help gain legitimacy. The existing literature that typically focus on the level of CSR has not been able to address this tension. 
Building on literature on non-financial information disclosure and Zuckman (1999)’s two-stage model, we develop the argument that firms gain legitimacy through a certain level of conformity in CSR practices. On the other hand, with the presence of legitimacy (analyst attention), disconformity (unique firm CSR) should be positively associated with firm value. Further, we differentiate types of conformity and argue that while scope conformity is more important in gaining legitimacy, content disconformity is more important in affecting firm value.