Does Competing Through Corporate Social Responsibility Engagements Lead to Superior Financial Performance?

Publication Date

9-19-2019

Abstract

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.

Document Type

Article

Keywords

corporate social responsibility; ESG (environmental, social, governance performance; KLD data; ratings; performance measurement; competitive advantage; reputational capital; sustainability

DOI

10.2139/ssrn.3449259

Source

SMU Cox: Finance (Topic)

Language

English

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