Motivating Corporate Social Responsibility Investment and Social Impact through Relative Performance Information

Abstract

ABSTRACT Firms often struggle to motivate managers’ CSR performance, and little attention has been paid to how performance evaluation can assist in this effort. We address this gap by examining the effects of relative performance information (RPI) on risky CSR investment decisions. Compared to when no RPI is provided, we find that providing RPI based on the size or impact rate of CSR investments improves performance on the ranked dimension, although effects are weaker in more risk-averse managers. We also find that providing both types of RPI separately may lead to similar performance as providing just one type, and that RPI based on a single composite measure that combines performance dimensions leads to the greatest performance along each dimension. Our study contributes to research and practice by identifying how RPI can motivate larger, more impactful CSR investments and by highlighting the role that managers’ risk preferences can play in these decisions. Data Availability: Data are available upon request.