Divergent Impacts of Voluntary CSR Disclosure on Profitability and Market Value: The Moderating Role of Environmentally Sensitive Industry

ABSTRACT Research on the relationship between corporate social responsibility (CSR) disclosure and firm performance has yielded contradictory findings, creating a persistent theoretical debate. This study contends that prior work has often conflated two distinct performance dimensions: the accounting‐based profitability and market‐based valuation. Drawing on stakeholder theory, we propose a dual‐pathway framework in which voluntary CSR disclosure is interpreted differently by operational and financial stakeholders. While such disclosure signals commitment to operational stakeholders, thereby enhancing ROA, it can simultaneously signal resource diversion or agency costs to investors, lowering Tobin's Q . Using text from the Management's Discussion and Analysis sections of U.S. 10‐K reports (1998–2023), we find strong support for these opposing effects. Moreover, industry environmental sensitivity mitigates the negative market reaction, highlighting the contextual nature of disclosure interpretation. This research contributes to long‐standing contradictions in the literature and advances stakeholder theory by showing how CSR disclosure creates value for some stakeholders while eroding it for others.