Year: 2025
Type: article
Abstract: This paper investigates the impact of peer environmental and social (E&S) incidents on the value of corporate social responsibility (CSR) for non-incident firms. We find that high-CSR engagement backfires in the presence of peer E&S incidents. Following negative peer events, non-incident firms with high-CSR ratings experience a 3.2% greater decline in firm value than those with low CSR ratings. The negative impact of peer E&S incidents on the value of CSR operates through two mechanisms: (1) cash flow effect, driven by reduced sales growth and profitability, and (2) cost of capital effect, evidenced by increased implied cost of equity and decreased institutional ownership for high-CSR firms. Cross-sectional analyses further reveal that the impact is more pronounced among larger firms, when incident peers have high-CSR standing, and in industries characterized by stronger CSR norms, greater competitive intensity, and more standardized products. Our findings challenge the view of CSR as an "insurance-like" mechanism during uncertain times, showing that peer E&S incidents can trigger the industry-wide spillovers of mistrust and raise concerns about industry ethics, ultimately diminishing the value of CSR.
Source: Journal of Business Ethics
Authors: Saeed Akbar, Thang Ho, Hanh T.H. Truong
Institutions: University of Bradford, Aston University
Language: English
Subfield: Strategy and Management
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,790
OpenAlex ID: W4414938198