Forthcoming, American Sociological Review
59 Pages Posted: 30 Aug 2014 Last revised: 18 Sep 2014
Date Written: August 29, 2014
Organizations are increasingly subject to rating and ranking by third-party evaluators. Research in this area tends to emphasize the direct effects of ratings systems that occur when ratings give key audiences, such as consumers or investors, more information about a rated firm. Yet, ratings systems may also indirectly influence organizations when the collective presence of more rated peers alters the broader institutional and competitive milieu. Rated firms may be more responsive to ratings systems when surrounded by more rated peers, and ratings may generate diffuse or spillover effects even among firms that are unrated. We test these arguments by analyzing how rated and unrated firms change their pollution behavior when more firms in their peer group are rated on environmental performance. Results indicate that the presence of more rated peers was often associated with emissions reductions. However, this relationship varies by the whether a firm was rated, whether the rating was positive or negative (if rated), and, often, features of the competitive and regulatory environment.
Keywords: ratings, peers, environment, institutional theory, corporate social responsibility
Suggested Citation: Suggested Citation
Sharkey, Amanda J. and Bromley, Patricia, Can Ratings Have Indirect Effects?: Evidence from the Organizational Response to Peers' Environmental Ratings (August 29, 2014). Forthcoming, American Sociological Review. Available at SSRN: https://ssrn.com/abstract=2489170