CSR Information and Regulatory Activity

Abstract

We investigate how regulators adjust their enforcement activities in response to firms’ corporate social responsibility (CSR) information. By exploiting exogenous variation in CSR ratings coverage and enforcement data from the U.S. Occupational Safety and Health Administration (OSHA), we observe an increase in enforcement activity toward newly CSR covered firms. We explore two non-mutually exclusive mechanisms to explain our findings: regulatory learning and firms’ reputational exposure after CSR coverage. Our results are consistent with CSR-related reputation and deterrence as plausible channels. Third-party CSR disclosures increase a firm’s reputational exposure when OSHA activities are incorporated into CSR ratings and disseminated to stakeholders. Consequently, this dynamic increases OSHA’s marginal benefit from its enforcement activities on newly covered firms. Evidence from institutional investor holdings corroborates this reputational mechanism. These findings provide novel insights into how availability and dissemination of CSR information shape regulatory activities.

Keywords: CSR information, Regulatory activity, Enforcement, CSR ratings, OSHA

JEL Classification: G18, J28, J81, K32, L51, M40, M41, M48