Does it Pay Off to Compete on Social Purpose?
57 Pages Posted: 19 Sep 2019 Last revised: 11 Feb 2020
Date Written: August 6, 2019
We develop a novel metric of corporate social responsibility (CSR) rivalry to capture the environmental sustainability engagements of a firm relative to its “green” and “toxic” peers. We document that our measure has superior predictive power about firms’ future pollution levels when compared to alternative unitary CSR scores. Firms with superior relative CSR performance exhibit higher sales growth, profitability, corporate valuation, and future stock returns. Our results suggest that firms compete for CSR ratings and that relative – in addition to unitary – CSR metrics are linked to financial performance.
Keywords: corporate social responsibility; ESG (environmental, social, governance) performance; KLD data; ratings; performance measurement; competitive advantage; reputational capital; sustainability
JEL Classification: M14; G30; G32
Suggested Citation: Suggested Citation