Beyond Good Intentions: Peer E&S Incidents and the Unravelling of CSR Value
Ho, T., Truong, H.T.H.
Ho, T.,
Truong, H.T.H.
Publication Date
2025
End of Embargo
Supervisor
Rights
(c) 2025 The Authors. This is an Open Access article distributed under the Creative Commons CC-BY license (https://creativecommons.org/licenses/by/4.0)
Peer-Reviewed
Yes
Open Access status
openAccess
Accepted for publication
2025-09-25
Institution
Department
Awarded
Embargo end date
Collections
Additional title
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.
Version
Published version
Citation
Akbar S, Ho T and Truong HTH (2025) Beyond Good Intentions: Peer E&S Incidents and the Unravelling of CSR Value. Journal of Business Ethics. Accepted for publication.
Link to publisher’s version
Link to published version
Link to Version of Record
Type
Article