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<p>This paper investigates the impact of peer environmental and social (E&amp;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&amp;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&amp;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&amp;S incidents can trigger the industry-wide spillovers of mistrust and raise concerns about industry ethics, ultimately diminishing the value of CSR.</p>

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Beyond Good Intentions: Peer E&S Incidents and the Unravelling of CSR Value

  • 期刊论文

  • 出版模式：

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  • 发表日期：

    2025年10月8日

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  • Saeed Akbar,
  • Thang Ho,
  • Hanh T.H. Truong

摘要

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.