Does it pay to be different? Relative CSR and its impact on firm value

• Main Authors: DING, David K., FERREIRA, Christo, WONGCHOTI, Udomsak
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2016
• Subjects: CSR; Corporate governance; Firm value; Stakeholders; Environmental; Corporate Finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/4996; https://ink.library.smu.edu.sg/context/lkcsb_research/article/5995/viewcontent/DoesitPayDifferentCSR_2014Aug_pp.pdf
• Institution: Singapore Management University

Conventional aggregation of Corporate Social Responsibility (CSR) raw scores and its interpreted impact on firm value have provided mixed evidence in the literature. We show that the value impact of CSR activities relies heavily on the industry-specific relative position of the firm. Only firms that distinguish themselves over their peers are associated with increased firm value. This finding is robust and holds for both responsible and irresponsible behaviors. Information concerns and portfolio construction can allude to a possible CSR clientele, suggesting the existence of an optimal CSR level. Our peer-effect results are robust to unobserved heterogeneity along the lines of Gormley and Matsa (2013).