Peer Effects of Corporate Social Responsibility

Abstract

We investigate how firms react to their product-market peers’ commitment to and adoption of corporate social responsibility (CSR) using a regression discontinuity design approach. Relying on the passage or failure of CSR proposals by a narrow margin of votes during shareholder meetings, we find the passage of a close-call CSR proposal and its implementation are followed by the adoption of similar CSR practices by peer firms. In addition, peers that have greater difficulty in catching up with the voting firm in CSR experience significantly lower stock returns around the passage, consistent with the notion that the spillover effect of the adoption of CSR is a strategic response to competitive threat. Using alternative definitions of peers and examining underlying mechanisms, we further rule out alternative explanations, such as that based on propagation by financial intermediaries. This paper was accepted by Gustavo Manso, finance department.

Women oppose sin stocks more than men do

“…As a result, corporate policies should change. For example, an increase in the number of female board members should decrease acquisitions of socially irresponsible companies (Guidi et al, 2020), and increase mimicry of corporate social responsibility policies (Cao et al, 2019). Such shifts in the composition of investors and corporate decision-makers might become tipping points, just as the number of "green" investors in the investor populationthat find severe pollution by a company to be unacceptable -might determine whether a company reforms or not (Heinkel et al, 2001).…”

In the LEED: Racing to the Top in Environmental Self‐Regulation

“…The race literature describes the diffusion and evolution of regulations, explaining adoption patterns as a function of competitive relationships between political entities. The same patterns can appear in the private sector: Firms improve their own local social and environmental performance by adopting the competitors' performance standards, even absent regulation (Cao, Liang, & Zhan, 2019; Mosley & Uno, 2007; Saikawa, 2013). These social and environmental improvements are attractive to stakeholders including investors (Heinzle, Boey Ying Yip, & Low Yu Xing, 2013; Mackey, Mackey, & Barney, 2007), employees (Singh, Syal, Grady, & Korkmaz, 2010; Turban & Greening, 1997), suppliers (Hyatt & Berente, 2017; Josserand, Kaine, & Nikolova, 2018), consumers (Zhang & Zhu, 2019), and society (Anbarasan, 2018; Cadez, Czerny, & Letmathe, 2019).…”

Fighting Climate Change with Disclosure? The Real Effects of Mandatory Greenhouse Gas Emission Disclosure

“…However, we argue that the Act can change stakeholders' information set also for Already voluntary adopters. First, stakeholders of these firms might benefit from comparability benefits when other firms in the UK are forced to adopt GHG emission disclosure allowing for more efficient benchmarking with peers (Cao et al, 2019;DEFRA, 2010). Besides the reliability and relevance of information, its comparability is also important for decision making.…”