We investigate how firms react to their peers' adoption of corporate social responsibility (CSR) by using a regression discontinuity design that relies on "locally" exogenous variations of CSR generated by shareholder proposals that pass or fail by a small margin of votes. Specifically, we find that peers of a voting firm who passed a close-call CSR proposal experience lower announcement returns and higher following-year CSR scores compared to those of a voting firm that marginally failed a CSR proposal. Such effects are stronger in peer firms with higher competitive pressure, better CSR performance relative to the voting firm, and a more transparent information environment. We find a more pronounced negative cumulative abnormal returns and a smaller CSR improvement in peer firms with higher financial constraints. Taken together, our empirical results show that peer effects play an important role in shaping firms' CSR performance and further confirm the argument that CSR has strategic value.
Corporate social responsibility, peer effects, product markets, shareholder proposal, regression discontinuity
Organizational Behavior and Theory | Social and Behavioral Sciences
LIANG, Hao; LIANG, Hao; and ZHAN, Xintong.
Peer effects of corporate social responsibility. (2017). 1-53. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/5340
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