Do Ratings of Firms Converge? Implications for Managers, Investors and Strategy Researchers
Forthcoming, Strategic Management Journal
30 Pages Posted: 17 Nov 2014 Last revised: 28 Jan 2015
Date Written: November 15, 2014
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: Suggested Citation