The Role of Social Value in Contracting

44 Pages Posted: 22 Nov 2022

See all articles by Nickolay Gantchev

Nickolay Gantchev

University of Warwick - Warwick Business School; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Jim Goldman

University of Warwick - Warwick Business School

Shu Zhang

Exeter Business School

Date Written: September 07, 2024

Abstract

Using over 1.25 million procurement contracts valued at over $250 billion, we study how contractors’ environmental and social (E&S) performance influences contract terms. Our findings show that E&S incidents lead to an 11-13% reduction in the amounts and a 12-14% decrease in the duration of new contracts. Additionally, contracts of poor E&S performers are 31% less likely to be renegotiated, and if renegotiated, are granted less favorable changes in amounts and durations than firms with clean E&S records. This suggests that firms with poor E&S performance are more rigorously monitored and penalized rather than given contract modifications to accommodate heightened E&S risks.

Keywords: Contracts, Public procurement, ESG performance, Environmental and social impact, Corporate monitoring

JEL Classification: H57, G38, G34, M14

Suggested Citation

Gantchev, Nickolay and Goldman, Jim and Zhang, Shu, The Role of Social Value in Contracting (September 07, 2024). Available at SSRN: https://ssrn.com/abstract=4280531 or http://dx.doi.org/10.2139/ssrn.4280531

Nickolay Gantchev (Contact Author)

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

HOME PAGE: http://www.NickolayGantchev.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

HOME PAGE: http://cepr.org

European Corporate Governance Institute (ECGI) ( email )

HOME PAGE: http://ecgi.global/users/nickolay-gantchev

Jim Goldman

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Shu Zhang

Exeter Business School ( email )

Exeter, EX3 0AZ
United Kingdom

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