What do we learn from ratings about corporate social responsibility? New evidence of uninformative ratings

Yang, Ruoke

doi:10.1016/j.jfi.2022.100994

Cited by 32 publications

(13 citation statements)

References 29 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The selective disclosure of positive information about a company's environmental or social performance, without full disclosure of negative information on these dimensions, so as to create an overly positive corporate image. Yang (2022) examines socially responsible investments' effect on environmental and social ratings, finding a connection between greenwashing and inflated ratings. The study questions the predictive value of higher ratings for future corporate behavior and suggests that addressing greenwashing enhances ratings accuracy.…”

Section: Negative Relationship: Legitimacy Theorymentioning

confidence: 99%

See 1 more Smart Citation

Corporate social responsibility and credit rating: evidence from French companies

Ben Saad,

Laouiti,

Ajina

2024

RAF

View full text Add to dashboard Cite

Purpose This study aims to provide further insights into the connection between corporate social responsibility (CSR) and companies’ credit ratings, while also exploring the role of corporate governance as a moderating factor. The hypotheses for this relationship are rooted in both legitimacy and stakeholder theories. Design/methodology/approach Using a sample of French non-financial listed firms from 2007 to 2020, this paper uses the ordered probit model introduced by Greene (2000). The issue of endogeneity has also been addressed. Findings The study reveals that CSR practices positively impact companies’ credit ratings by enhancing solvency and financial performance. Specifically, firms that prioritize CSR, particularly in the social and environmental dimensions (such as community relations, diversity, employee relations, environmental performance and product characteristics), tend to have higher credit ratings and a reduced risk of default. This suggests that credit rating agencies likely incorporate CSR performance when assigning credit ratings. Furthermore, the quality of corporate governance acts as a moderator, strengthening the relationship between CSR and credit ratings. The findings remain robust even after accounting for key firm attributes and addressing potential endogeneity between CSR and credit ratings. Practical implications This research provides valuable guidance for policymakers, corporate managers, investors and other stakeholders, as it offers insights into the influence of CSR activities on risk premiums and financing costs. For financial institutions, expanding credit decisions to encompass non-financial factors such as CSR can result in more accurate predictions of firm credit quality compared to relying solely on financial indicators. Originality/value To the best of the authors’ knowledge, this study stands out as the first to systematically examine the relationship between CSR and credit ratings within the French context. Moreover, it distinguishes itself by investigating the moderating influence of corporate governance on this relationship, setting it apart from prior research.

show abstract

Section: Negative Relationship: Legitimacy Theorymentioning

confidence: 99%

“…Yang (2022) examines socially responsible investments’ effect on environmental and social ratings, finding a connection between greenwashing and inflated ratings. The study questions the predictive value of higher ratings for future corporate behavior and suggests that addressing greenwashing enhances ratings accuracy.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

Corporate social responsibility and credit rating: evidence from French companies

Ben Saad,

Laouiti,

Ajina

2024

RAF

View full text Add to dashboard Cite

show abstract

“…With the deepening of ESG information disclosure requirements [10], an increasing number of firms are publishing annual CSR reports, which in part enhances the provision of ESG data, but in turn, raises concerns regarding the quality and reliability of the data. Specifically, the ESG metrics in these reports may be subject to “greenwashing” (Yang, 2021). Moreover, the indicators from these disclosures are often inconsistent across companies and are difficult to compare, leading to a disagreement across rating agencies (Christensen et al ., 2022).…”

Section: How Is Esg Measured?mentioning

confidence: 99%

A survey on ESG: investors, institutions and firms

Rau

Yu²

2023

CFRI

View full text Add to dashboard Cite

PurposeOver the past two decades, the topics of Environmental, Social and Corporate Governance (ESG) and Corporate Social Responsibility (CSR) have attracted an increasing amount of interest, reflecting a growing sensitivity of investors and corporations towards environmental, social and governance issues.Design/methodology/approachThis survey offers an overview of the academic literature on ESG/CSR through the lens of investors, institutions and firms. We first discuss the definitions of ESG and CSR and their relationship to each other.FindingsWe next describe how ESG is measured and note problems with the measurement of and quality of ESG data and discrepancies between different measures of ESG. We then turn our attention to investors, examining what types of investors invest in ESG and the role of institutional investors in ESG. From the firm's perspective, we discuss why firms themselves conduct ESG. We also summarize the literature on the impact of ESG on firms: how ESG affects firms' financing, disclosure and reporting activities and firm performance. Finally, we describe other consequences of the focus of ESG and CSR on firms and investors.Originality/valueThis survey offers an overview of the academic literature on ESG/CSR through the lens of investors, institutions and firms.

show abstract

“…Additional measurement concerns include a disagreement between ESG data providers (e.g., Gibson, Krueger, and Schmidt [2019], Berg, Koelbel, and Rigobon [2022], Christensen, Serafeim, and Sikochi [2022]) or that line items are often not material (Yang [2020]). To mitigate these potential concerns, we run a battery of tests with a variety of alternative environmental performance measures.…”

Section: Sample and Summary Statisticsmentioning

confidence: 99%

Renewable Governance: Good for the Environment?

Dyck

Lins

Roth

et al. 2022

J of Accounting Research

View full text Add to dashboard Cite

We conjecture that board renewal mechanisms—those substantive enough to renew the thinking of the board—are required before investors can address the mismatch between their preferences regarding environmental sustainability and what insiders at firms are actually doing. We identify the adoption of majority voting for directors and the introduction of a female director as two corporate governance mechanisms potentially strong enough to renew a board's thinking on sustainability. Using a sample of 3,293 firms from 41 countries, along with quasi‐exogenous shocks to board renewal mechanisms in Canada and France, we find that both board renewal mechanisms are associated with significantly higher future environmental performance. Further tests provide suggestive evidence that board renewal is more strongly associated with environmental performance in settings with better institutions and more motivated institutional investors. These results suggest the importance of board renewal for alignment of firm policies with investor preferences around the world.

show abstract

What do we learn from ratings about corporate social responsibility? New evidence of uninformative ratings

Cited by 32 publications

References 29 publications

Corporate social responsibility and credit rating: evidence from French companies

Corporate social responsibility and credit rating: evidence from French companies

A survey on ESG: investors, institutions and firms

Renewable Governance: Good for the Environment?

Contact Info

Product

Resources

About