The Role of Corporate Social Responsibility (CSR) Information in Supply-Chain Contracting: Evidence from the Expansion of CSR Rating Coverage

79 Pages Posted: 24 Mar 2021 Last revised: 11 Sep 2022

See all articles by Alper Darendeli

Alper Darendeli

Nanyang Technological University

Peter Fiechter

University of Neuchatel - Institute of Financial Analysis

Joerg-Markus Hitz

University of Goettingen

Nico Lehmann

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Date Written: September 1, 2022

Abstract

We examine the effect of CSR information on stakeholder decision-making, specifically on supply-chain contracting. To obtain plausibly exogenous variation in CSR information, we exploit the 2017 expansion of CSR rating coverage from Russell 1000 to Russell 2000 firms (hereafter, “treated firms”) by Thomson Reuters Asset4. Using a difference-in-differences design with the previously covered Russell 1000 supplier firms as the control group, we find a negative effect of the CSR information shock for treated suppliers with comparatively low CSR ratings. On average, these suppliers experience reductions in their number of contracts and corporate customers. In cross-sectional analyses, we document variation in our treatment effects consistent with two underlying mechanisms: (i) benchmarking of suppliers’ CSR by corporate customers and (ii) CSR-related public pressure on customer-supplier contracting. Collectively, our findings provide novel evidence on the causal effect of CSR information on stakeholder decision-making.

Keywords: Corporate social responsibility (CSR), stakeholder decision-making, CSR information shock, supply chain contracting, CSR rating vendors

JEL Classification: G24, G34, M14, M40, M41

Suggested Citation

Darendeli, Alper and Fiechter, Peter and Hitz, Joerg-Markus and Lehmann, Nico, The Role of Corporate Social Responsibility (CSR) Information in Supply-Chain Contracting: Evidence from the Expansion of CSR Rating Coverage (September 1, 2022). Journal of Accounting & Economics (JAE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3806236 or http://dx.doi.org/10.2139/ssrn.3806236

Alper Darendeli (Contact Author)

Nanyang Technological University ( email )

Nanyang Business School, S3-B1C-85
Nanyang Ave
Singapore, Singapore 639798
Singapore
+65 67906147 (Phone)

Peter Fiechter

University of Neuchatel - Institute of Financial Analysis ( email )

Rue A.-L. Breguet 2
Neuchatel, CH-2000
Switzerland

Joerg-Markus Hitz

University of Goettingen ( email )

Platz der Goettinger Sieben 3
D-37073 Goettingen
Germany
+49 551 39 7313 (Phone)

HOME PAGE: http://www.uni-goettingen.de/en/110622.html

Nico Lehmann

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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