Deceived by ‘S’: Corporate Scandals and ESG

38 Pages Posted: 1 May 2023 Last revised: 22 Sep 2023

See all articles by Christina Kjaer

Christina Kjaer

Center for Corporate Governance

Tom Kirchmaier

London School of Economics - Centre for Economic Performance; Copenhagen Business School

Date Written: April 25, 2023


In this paper we study the impact of environmental, social, and governance (ESG) ratings on the likelihood of subsequent corporate scandals. We find that the ‘S’ score (social responsibility) has a predictive power on scandals, while the overall ESG ratings has not. This finding holds for all our specifications. The underlying question that we want to address with this paper is whether the ESG rating agencies are able to establish ratings that reflect firms’ real efforts to act responsibly towards the society, or whether the ratings may contribute to deceiving the audience. Our work contributes to the ongoing ‘aggregate confusion’ discussion amongst ESG scholars, showing that there is little informational content in an aggregate score (as it measures very diverse dimensions). Contrary to our expectation, the ‘S’ score is positively correlated with the likelihood of corporate scandals, suggesting that the ‘S’ score does not live up to measuring a company’s social responsibility, including the ‘commitment to being a good corporate citizen’ (Refinitiv, 2022). Our analysis is based on a hand-collected matched sample of 113 global corporate scandals.

Keywords: Corporate scandals, ESG rating agencies, ESG ratings, corporate misconduct, corporate social performance, corporate governance, impression management.

JEL Classification: I11; I12; I14; I15

Suggested Citation

Kjaer, Christina and Kirchmaier, Tom, Deceived by ‘S’: Corporate Scandals and ESG (April 25, 2023). Available at SSRN: or

Christina Kjaer (Contact Author)

Center for Corporate Governance ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
+4561717825 (Phone)

Tom Kirchmaier

London School of Economics - Centre for Economic Performance ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 207 955 6854 (Phone)


Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000

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