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Do Ratings of Firms Converge? Implications for Managers, Investors and Strategy Researchers

Forthcoming, Strategic Management Journal

HEC Paris Research Paper No. SPE-2015-1076

30 Pages Posted: 17 Nov 2014 Last revised: 28 Jan 2015

Aaron Chatterji

Duke University - Fuqua School of Business

Rodolphe Durand

HEC Paris - Strategy & Business Policy

David I. Levine

University of California, Berkeley - Economic Analysis & Policy Group

Samuel Touboul

IPAG Business School; HEC Paris (Groupe HEC) - Strategy & Business Policy

Date Written: November 15, 2014

Abstract

Raters of firms play an important role in assessing domains ranging from sustainability to corporate governance to best places to work. Managers, investors, and scholars increasingly rely on these ratings to make strategic decisions, invest trillions of dollars in capital and study corporate social responsibility (CSR), guided by the implicit assumption that the ratings are valid. We document the surprising lack of agreement across social ratings from six well-established raters. These differences remain even when we adjust for explicit differences in the definition of CSR held by different raters, implying the ratings have low validity. Our results suggest that users of social ratings should exercise caution in interpreting their connection to actual CSR and that raters should conduct regular evaluations of their ratings.

Suggested Citation

Chatterji, Aaron and Durand, Rodolphe and Levine, David I. and Touboul, Samuel, Do Ratings of Firms Converge? Implications for Managers, Investors and Strategy Researchers (November 15, 2014). Forthcoming, Strategic Management Journal; HEC Paris Research Paper No. SPE-2015-1076. Available at SSRN: https://ssrn.com/abstract=2524861

Aaron Chatterji

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States

Rodolphe Durand (Contact Author)

HEC Paris - Strategy & Business Policy ( email )

Jouy-en-Josas Cedex, 78351
France

David Ian Levine

University of California, Berkeley - Economic Analysis & Policy Group ( email )

Berkeley, CA 94720
United States
510-642-1697 (Phone)
510-643-1420 (Fax)

Samuel Touboul

IPAG Business School ( email )

184 BD Saint Germain
Paris, 75006
France

HEC Paris (Groupe HEC) - Strategy & Business Policy ( email )

Jouy-en-Josas Cedex, 78351
France

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