Keeping up with the Joneses: The role of investee peers corporate environmental responsibility

Abstract

AbstractScholars have investigated the industry peer effect of corporate social responsibility (CSR). Borrowing from the awareness–motivation–capability (AMC) framework from competitive dynamics literature, we shift attention to focus on an important but neglected peer—investee peers—and argue that the corporate environmental responsibility (CER) of investee peers positively affects a focal firm's CER. Using data from Chinese listed firms from 2008 to 2018, we find that firms invest more on CER in response to increasing CER investment by investee peer firms (more awareness). This relationship is further affected by the firm's motivation (when the common shareholder is a foreign investor) and ability (when the focal firm's financial performance is high) to respond to competitive threats and tensions from investee peers. Our study contributes to the literature on CSR (specifically CER) by introducing the role of investee peers and extending the AMC framework to the CER literature.