Corporate Social Responsibility Ratings Research Articles

Keeping them honest? Exploring the impact of labor unions on CSR

Purpose The role of labor unions in relation to corporate social responsibility (CSR) remains both ambiguous and crucial for union members and business leaders. Given the complex relationship between labor unions and corporations, this study aims to address whether labor unions keep corporations honest (by monitoring CSR activities) or potentially render CSR initiatives less necessary. Design/methodology/approach Using data from the MSCI Kinder, Lydenberg, Domini Database for firms in the Russell 1000 Index, this study examines the link between labor unions and CSR in U.S. companies over a six year period. Generalized least squares models were used to test the hypotheses for 3,937 firm-year observations. Findings The findings show that unionized companies generally pay less attention to CSR compared to nonunionized ones. The presence of labor unions and positive union-management relations both show a significant negative impact on CSR ratings, where positive union-management relations negatively affect CSR ratings more than just the presence of labor unions. Further, when considering the environmental, social and governance aspects of CSR separately, the results are more complex, suggesting that the relationship between labor unions and CSR varies depending on specific ESG dimensions. Originality/value CSR, a well-researched area, rarely addresses the companies' relationships with labor unions. Studies in South Korea and the UK have touched on the impact of labor unions on CSR, but in the USA it remains unexplored. This study extends this line of work by examining U.S. companies.

An Empirical Study of the Relationship Between Digital Transformation, Corporate Social Responsibility and Financial Performance

The article investigates the impact of corporate social responsibility (CSR) and digital transformation (DT) on corporate financial performance (CFP) indicators, as well as the moderating effect of DT on the relationship between CSR and CFP indicators. The study was conducted using Stata 17.0 software based on data (5709 observations) on 558 A-share listed manufacturing companies of the Shanghai and Shenzhen Stock for 2012-2021 (excluding financial and insurance companies, ST and ST* companies, as well as companies with incomplete data). The independent variable used in the modelling process is the CSR rating report of the Hexun website, indicators of which are reconstructed by dividing them into strategic CSR (shareholder responsibility, employee responsibility, customer responsibility) and altruistic CSR (environmental responsibility and social contribution). The dependent variable is 2 CFP indicators: return on equity (ROE) and TOBIN’s Q. The DT index is used as a moderating variable, for the calculation of which the texts of companies’ annual reports were segmented using the Python programming language and standardised data on the frequency of keywords in 4 dimensions: digital technology application, Internet business model, intelligent manufacturing and contemporary information system; the weights for each dimension index was determined using the entropy approach. The control variables are corporate assets (Size), financial leverage level (Lev), current ratio (Cur), firm growth (Gro), shareholding ratio of the largest shareholder (First) and technological innovation (RD) of companies. The study also considered the year and industry factors. To study the moderating effect of DT on the relationship between CSR and CFP indicators of companies in different situations, the grouping variables chosen were the ownership type (state-owned and non-state-owned companies), the enterprise lifecycle (cash flow portfolio method was used to identify its stages) and the degree of market competition (Herfindahl-Hirschman Index). The modelling is based on a fixed-effects regression model. The study found that both CSR and DT have a positive impact on CFP, and that DT moderates the relationship between CSR and CFP, indicating that integrating digital technologies with sustainable development strategies can enhance financial benefits. The study also highlights the importance of different dimensions of corporate social responsibility. A high level of digital transformation strengthens the promotion effect of strategic social responsibility on current and future financial success of companies. Meanwhile, the promotion effect of altruistic social responsibility on current financial performance is significant. Heterogeneity analysis shows that the positive moderating effect of digital transformation on the relationship between corporate social responsibility and financial performance mainly applies to private firms, firms in the mature stage, and firms with low market competition. The article offers practical advice for businesses seeking to use digital transformation to maximise economic and social value.

Corporate social responsibility and credit rating: evidence from French companies

PurposeThis study aims to provide further insights into the connection between corporate social responsibility (CSR) and companies’ credit ratings, while also exploring the role of corporate governance as a moderating factor. The hypotheses for this relationship are rooted in both legitimacy and stakeholder theories.Design/methodology/approachUsing a sample of French non-financial listed firms from 2007 to 2020, this paper uses the ordered probit model introduced by Greene (2000). The issue of endogeneity has also been addressed.FindingsThe study reveals that CSR practices positively impact companies’ credit ratings by enhancing solvency and financial performance. Specifically, firms that prioritize CSR, particularly in the social and environmental dimensions (such as community relations, diversity, employee relations, environmental performance and product characteristics), tend to have higher credit ratings and a reduced risk of default. This suggests that credit rating agencies likely incorporate CSR performance when assigning credit ratings. Furthermore, the quality of corporate governance acts as a moderator, strengthening the relationship between CSR and credit ratings. The findings remain robust even after accounting for key firm attributes and addressing potential endogeneity between CSR and credit ratings.Practical implicationsThis research provides valuable guidance for policymakers, corporate managers, investors and other stakeholders, as it offers insights into the influence of CSR activities on risk premiums and financing costs. For financial institutions, expanding credit decisions to encompass non-financial factors such as CSR can result in more accurate predictions of firm credit quality compared to relying solely on financial indicators.Originality/valueTo the best of the authors’ knowledge, this study stands out as the first to systematically examine the relationship between CSR and credit ratings within the French context. Moreover, it distinguishes itself by investigating the moderating influence of corporate governance on this relationship, setting it apart from prior research.

Acquisitions and social capital

AbstractWe examine the association between the social capital—social norms that encourage altruism and discourage opportunism—in the state of the firm's headquarters and the acquisitions it makes. We find that the cumulative abnormal return around an acquisition announcement is high when an acquirer is headquartered in a high social capital state in the United States. This effect is robust and incremental to the effect of a firm's corporate social responsibility (CSR) ratings and economically comparable to the effect of corporate governance. The effect of social capital is stronger for firms that have lower CSR ratings, which indicates social capital may act as a substitute for CSR. An additional analysis shows that social capital's effect is stronger in a subsample of firms with weak corporate governance. Acquirers from states with high social capital also demonstrate less hubris in acquiring targets than those from states with low social capital as the evidence of lower bid premiums indicates. Overall, our results show that the social norms that social capital measures mitigate potential agency problems in acquisitions by inducing managers to honor their obligations to shareholders.

Does managerial ability matter in corporate sustainability-related dynamics? An empirical investigation

This study aims to assess the intricate interplays between managerial ability, corporate social responsibility (CSR), and firm value, focusing on 3,498 company-year observations sourced from the RANKINS CSR RATINGS and China Stock Market & Accounting Research (CSMAR) databases representing China’s Shanghai and Shenzhen A-share listed companies from 2009 to 2018. Employing a rigorous sample selection process and utilizing data from reliable databases, the research employs a comprehensive methodology to explore the intricate corporate sustainability-related dynamics influencing organizational success and societal impact.The findings reveal a compelling negative correlation between managerial ability and CSR performance, corroborating previous research and suggesting potential challenges in reconciling managerial competence with social responsibility priorities. Furthermore, this paper establishes a negative correlation between CSR and firm value, with managerial ability influencing the magnitude of this impact, underscoring the significance of managerial skills in moderating the relationship between CSR initiatives and overall corporate performance. Moreover, the study uncovers a robust positive correlation between managerial ability and firm value, emphasizing the pivotal role of adept leadership in achieving higher corporate valuation. It provides valuable insights for practitioners, policymakers, and scholars, creating a conducive environment for well-informed decision-making. In the ever-changing corporate landscape, a deep understanding of these interconnections is essential to nurture business practices that are both sustainable and value-oriented. AcknowledgmentThis paper is co-funded by the European Union through the European Education and Culture Executive Agency (EACEA) within the project “Embracing EU corporate social responsibility: challenges and opportunities of business-society bonds transformation in Ukraine” – 101094100 — EECORE – ERASMUS-JMO-2022-HEI-TCH-RSCH-UA-IBA/ERASMUS-JMO-2022-HEI-TCHRSCH https://eecore.snau.edu.ua/Oleh PASKO expresses sincere gratitude for the support from the Kirkland Research Program, generously provided by the Leaders of Change Foundation established by the Polish-American Freedom Foundation.

Non‐Investor Institutions' Site Visits and Corporate Social Responsibility*

AbstractPrevious studies show that institutional investors play an important role in shaping corporate social responsibility (CSR). The role of non‐investor institutions such as media firms is largely unexplored, especially in China. This study examines the impact of site visits by non‐investor institutions on visited firms' CSR ratings (excluding corporate governance (CG)) in China. The baseline result shows that site visits are associated with improved CSR ratings. The result is robust after controlling for potential endogeneity issues. It is also robust with alternative CSR ratings by different data providers. The channel test suggests that non‐investor institutions' site visits improve CSR ratings by increasing both CSR disclosure and actual CSR activities. To highlight the difference between our study and recent research on corporate site visits by institutional investors, we perform a further test to show that non‐investor institutions' visits improve the non‐CG aspect but not the CG aspect of CSR ratings while institutional investors' visits improve the CG aspect but not the non‐CG aspect of CSR ratings.

Economic policy uncertainty and green innovation: Does corporate social responsibility matter?

This research examines the relationship between economic policy uncertainty and green innovation, highlighting the mediating effect of corporate social responsibility. The results indicate a pronounced negative correlation between the two, with firms reducing green efforts during periods of heightened policy uncertainty. However, higher corporate social responsibility ratings moderate this effect, highlighting firms' unwavering commitment to green initiatives in the face of uncertainty. The findings advocate for prudent policymaking and promotion of corporate social responsibility to support green efforts amidst fluctuating economic scenarios.

Corporate social responsibility and stock resilience to COVID-19: A contract theory perspective

Drawing on contract theory, we predict that robust corporate social responsibility (CSR) practices can play a pivotal role in maintaining stakeholder support and safeguarding shareholder values amidst significant financial uncertainties caused by COVID-19 outbreaks. Through empirical tests centered on the January 2020 outbreak in China, we investigate whether pre-pandemic CSR performance influences firm resilience during the crisis. Results show high-CSR firms experienced moderate stock gains, while low-CSR firms faced significant losses around the Wuhan lockdown. Controlled models affirm a positive link between CSR ratings and abnormal stock returns during the outbreak, especially for firms in heavily affected regions and competitive industries. In line with contract theory, our findings underscore how strong pre-pandemic CSR enhances profitability and mitigates uncertainty across operations, supply chains, and demand fluctuations.

Corporate social responsibility and disclosure transparency

Purpose This study aims to investigate the relation between corporate social responsibility (CSR) and disclosure transparency by examining over 12,000 disclosures of financial statements extending over 20 years. The purpose is to understand how CSR ratings relate to the level of disaggregation in financial statement line items. The study considers additional factors, such as firm size and governance, that can accentuate or moderate this relation. Design/methodology/approach This study applies regression analysis, including interactions, to test the magnitude of the relation between CSR ratings and disclosure transparency. CSR is measured as a composite score that ranks firms on their reputation over numerous indicators compiled by Morgan Stanley Capital International. Disclosure transparency is measured as the level of disaggregation in financial statement line items. Findings The study reveals evidence consistent with the notion that firms which are more CSR conscious are also more transparent with financial statements. Evidence shows that the level of transparency is more sensitive to changes in CSR for firms less CSR conscious. Firm size is found to moderate this relation, whereas enhanced governance accentuates it. Originality/value There is limited research on the relation between CSR ratings and disclosure transparency. To the best of the authors’ knowledge, this is the first empirical evidence on the relation between CSR ratings and the disaggregation of financial statement line items. Results from this study help us understand the drivers of disclosure transparency, which can aid regulators, investors and other stakeholders in knowing how such drivers impact managerial decisions on the disaggregation of financial statements. Accountants play a central role in producing transparent and disaggregated accounting disclosures, and their role is pivotal in effectively integrating CSR into accounting and reporting models.

Great Chinese famine, corporate social responsibility and firm value

We conceptualize that CEOs who endure traumatic experiences stemming from man-made disasters practice less corporate social responsibility. We exploit a natural experiment—the Great Chinese Famine—to empirically test this hypothesis. We find that (i) firms with CEOs who experienced the Great Chinese Famine score lower in corporate social responsibility ratings than a comparison group; (ii) this relationship is mainly driven by prosocial practices tied to employee relations, environmental protection, supplier relations, and community contributions; and (iii) this negative relationship is more pronounced in firms whose CEOs were younger when they experienced the famine, (iv) the positive relationship between CSR scores and firm value is more pronounced in firms with CEO without famine experiences. These results are robust in the face of several sources of endogeneity. Our study contributes to ongoing research regarding how top executives' early experiences affect their managerial decisions. It also enriches work surrounding corporate social responsibility and the plausibly exogenous determinants of prosocial preferences.

Did Corporate Social Responsibility Vaccinate Corporations Against COVID-19?

Using an international setting consisting of 5410 corporations domiciled in 24 countries, we test the insurance-like effect of corporate social responsibility (CSR) performance in the era of the pandemic and confirm that CSR performance increases socially responsible companies' resilience against the adverse effects of the crisis. Comparing stakeholders' responses to CSR activities during the pandemic and normal periods, we observe that the link between CSR performance and firm value is stronger during the crisis period. We also realize that the social aspect of CSR performance is the main driver for the mentioned effects. Finally, comparing the resilience of highly committed socially responsible companies with those with moderate and very low CSR ratings, we observe that best-in-class companies enjoy the greatest buffering effects, implying that the insurance-like effect of CSR performance is non-linear against systematic crises. Findings are robust to ceremonial CSR activities, extreme values of market-based instruments, endogeneity concern, etc.

Corporate Social Responsibility Rating, Corporate Governance, and Financial Distress: Evidence from China

AbstractThis study investigates the relationship between corporate social responsibility (CSR) and financial distress in China using the O‐score and a Chinese sample of 4202 observations between 2011 and 2017. The relationship is accordingly more pronounced in weak corporate governance firms with low levels of institutional shareholders and free cash flow and among non‐state‐owned enterprises and mandatory CSR disclosure firms. The findings are robust to endogeneity through robustness checks and the 2013 Sichuan Lushan earthquake as an exogenous shock to CSR. Ultimately, the study will help investors, shareholders, and policymakers appreciate the impact of CSR dimensions.

Do corporate social responsibility ratings have any effect on traffic congestion?

• Employs quantitative research and analysis methods. • Explores traffic congestion in light of CSR ratings and its translation to real-world outcomes. • An innovative idea on sustainable transportation and policy in CSR. • Enhancing CSR policy in mitigating traffic congestion is an area where private entities can have a significant local impact on a social issue affecting people, plant, and profit. Traffic congestion (TC) is a complex issue that has an adverse impact on the environment, business operations, livability, and health of a community. Supply-side TC mitigation measures increase transportation capacities while demand-side measures attempt to modify travel behavior so that the travel demand is reduced. As part of the demand-side, some corporations are investing in TC reduction through actions that contribute to improved walkability, reduced peak travel demand, and active commuting. While beneficial for their local communities, TC reduction efforts are not specifically tagged as a part of corporate social responsibility (CSR) endeavors. CSR involves reporting of a company’s stewardship towards its community and environmental impact. Research reflecting on the impact of CSR on TC has not been conducted. This study aims to fill this gap. Using corporations headquartered in the top traffic-congested cities in the United States, this study examines the relationship between TC and CSR. This research employed a hierarchical linear model with two datasets, Travel Time Index (TTI) and CSRHub ratings. Of the four CSR categories studied, community, employees, and environment ratings are significantly related to TTI, with employees and environment ratings having an inverse relationship to TTI. This shows that congestion has a strong impact on the environment and that companies, through their employee policies, can impact TC. The results also highlight the opportunities that companies have in potentially reducing their environmental impact by incorporating congestion reduction strategies as part of their CSR, either as a separate measure or as part of their environmental or employee CSR ratings. Our results are also a starting point for new tools/strategies that transportation policymakers and analysts can use to engage companies to help mitigate TC. A further study on other cities with major traffic problems may shed more light on CSR and TC.

Stock repurchasing and corporate social responsibility

Stock repurchases are controversial. Researchers often view the positive association between free cash flow and the volume of the stock repurchases to be in the shareholders’ interest and the positive association between executive options and stock repurchases to be in the managers’ interest. Using firms’ corporate social responsibility (CSR) ratings as a measure of ethical culture—one that increases the cost of self-serving behavior for managers— we examine whether a firm’s CSR rating is related to its stock repurchase decisions. Although the baseline regression shows a positive association between CSR and repurchases, we find that CSR amplifies the positive association between free cash flow and stock repurchases and lessens the positive association between executive options and stock repurchases. These results indicate that ethical culture might play a role in repurchase decisions: it may encourage repurchases aligned with shareholders’ interests and discourage those primarily in managers’ interest. Furthermore, we also find that high CSR firms are associated with a greater completion rate of announced repurchase programs and receive more favorable stock market reaction to their repurchase announcements.

The relationship between firms’ corporate social performance and green technology innovation: The moderating role of slack resources1

This study explores the relationship between firms’ corporate social responsibility (CSR) and their “green” technology innovation in the context of a developing country with a high level of economic growth (China). Using data from listed companies, green patent authorization data from the State Intellectual Property Office, and social responsibility rating data from Rankin’s CSR Ratings of China from 2009 to 2017, we find that a higher CSR rating is highly positively correlated to green technology innovation as measured by number of green patents granted. Results indicated that corporate social performance plays a contributory role in green technology innovation. We also find that unabsorbed slack resources enhance the positive relationship between CSR rating and the number of green technology patents.

The role of corporate social responsibility (CSR) information in supply-chain contracting: Evidence from the expansion of CSR rating coverage

We examine the effect of CSR information on stakeholder decision-making, specifically on supply-chain contracting. To obtain plausibly exogenous variation in CSR information, we exploit the 2017 expansion of CSR rating coverage from Russell 1000 to Russell 2000 firms (hereafter, “treated firms”) by Thomson Reuters Asset4. Using a difference-in-differences design with the previously covered Russell 1000 supplier firms as the control group, we find a negative effect of the CSR information shock for treated suppliers with comparatively low CSR ratings. On average, these suppliers experience reductions in their number of contracts and corporate customers. In cross-sectional analyses, we document variation in our treatment effects consistent with two underlying mechanisms: (i) benchmarking of suppliers' CSR by corporate customers and (ii) CSR-related public pressure on customer-supplier contracting. Collectively, our findings provide novel evidence on the causal effect of CSR information on stakeholder decision-making.

Corporate social responsibility and credit rating around the world: The role of societal trust

AbstractWe hypothesize that societal trust alleviates moral hazard concerns that undermine credit rating agencies’ perceived value of corporate social responsibility (CSR). We test our hypothesis using a large global sample and find a more salient relationship between CSR and credit rating only in countries with high societal trust. Our findings reconcile the mixed empirical worldwide evidence on this relationship. Additional tests provide further evidence that it is societal trust, not other country‐level factors, that drives our results.

Information disclosure, practical actions and dynamics of employees' health and safety issues in Chinese family businesses-Evidence based on Chinese a-share listed companies.

IntroductionGlobal health emergency as COVID-19 has brought unprecedented concerns to the health and safety of employees, which is important yet long-neglected. This paper studies the mechanism and influencing factors of Chinese family enterprises performance in employees' health and safety from information disclosure, practical action and dynamic change. And based on theoretical framework and empirical model, this paper provides feasible regulatory policies on the behavior of family business.MethodsThis study construct a game theory framework and uses a sample of Chinese A-share listed companies. The database is provided by a third-party corporate social responsibility rating agency, SynTao Green Finance. We use empirical models to test the hypothesis from the theoretical model of game theory.ResultsIn practice, family businesses are less likely to fulfill the health and safety responsibilities of employees compared to non-family businesses. Family businesses are likely to be more motivated than other businesses to send signals that they are performing their responsibilities well. From the view of operation term, family businesses will be gradually inclined to better fulfill the health and safety responsibilities of their employees, while this process will show a “U” shape change over operation time.ConclusionsAs there is inconsistency between the information disclosure and actual practice of family enterprises when it comes to the issue of employee health and safety, more related regulatory policies and stakeholder monitoring are needed. Although the performance of family enterprises in this regard will be better in the long run, it is still necessary to improve employees' legal and rights awareness and enhance the effectiveness of supervision over external stakeholders.

Judge Ideology and Corporate Sexual Orientation Equality

We investigate the role that judge ideology plays in determining corporate sexual orientation equality (CSOE) initiatives. We find a negative relationship between liberal judge ideology and CSOE initiatives. This is consistent with the agency perspective. Further analysis suggests that this association is intensified for firms led by powerful chief executive officers (CEOs) and those that possess higher corporate social responsibility (CSR) ratings. Finally, we show that firms in liberal jurisdictions that invest more in CSOE initiatives pay higher premium while raising external capital. Our results are robust for an array of sensitivity and identification tests.

Corporate social responsibility and corporate tax avoidance: The channel effect of consumer awareness

AbstractThis paper investigates the relationship between corporate social responsibility (CSR) and corporate tax avoidance and the impact of consumer awareness on the constructs. We show that consumer awareness has the effect of decreasing the positive relation between CSR ratings and tax avoidance levels. Our findings are robust to various measures of our constructs. Collectively, the findings of this study lend credence to the risk‐management view of CSR and demonstrate that consumer awareness acts as a behavioral intervention and governance mechanism to help mitigate corporate hypocrisy.