Peer behavior plays an important role in shaping companies’ CSR performance. That’s the finding of a new study that looks at how businesses react to their peers’ adoption of CSR practices. The study, Peer Effects of Corporate Social Responsibility by researchers at the Chinese University of Hong Kong and Singapore Management University, notes that companies do not operate in isolation. The authors examine how the competitive advantage gained by CSR strategies affect the practice and value of peer firms.
Specifically, the study finds that peers of a voting firm who passed a close-call CSR proposal experienced lower announcement returns and higher following-year CSR scores, compared to those of a voting firm that marginally failed a CSR proposal. The effects are stronger in companies with higher competitive pressure, better CSR performance relative to the voting firm, and a more transparent information environment.
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