The Impact of Corporate Social Responsibility on Investment Recommendations: Analysts’ Perceptions and Shifting Institutional Logics

By Ioannis Ioannou, George Serafeim. 2015

948 citations recorded by the source corpus.

type="main" xml:id="smj2268-abs-0001"> We explore the impact of corporate social responsibility (CSR) ratings on sell-side analysts' assessments of firms' future financial performance. We suggest that when analysts perceive CSR as an agency cost they produce pessimistic recommendations for firms with high CSR ratings. Moreover, we theorize that, over time, the emergence of a stakeholder focus shifts the analysts' perceptions of CSR. Using a large sample of publicly traded U.S. firms over 15 years, we confirm that, in the early 1990s, analysts issue more pessimistic recommendations for firms with high CSR ratings. However, analysts progressively assess these firms more optimistically over time. Furthermore, we find that analysts of highest status are the first to shift the relation between CSR ratings and investment recommendation optimism . Copyright © 2014 John Wiley & Sons, Ltd.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/d4eaeb1deb03662f1a96febc7a399a115cc23ffe

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Citations in the corpus

Impact of disclosure and assurance quality of corporate sustainability reports on access to finance (2019, methodology): “In the given research vein, Ioannou and Serafeim (2015) and Luo et al.”
Analyzing Analyst Research: A Review of Past Coverage and Recommendations for Future Research (2018, background): “Star analysts are known to have greater influence on investors, are more prone to CEO favor rendering, and more readily accept organizational change (e.g., Boivie et al., 2016; Ioannou & Serafeim, 2015; Westphal & Clement, 2008).”
Is Institutional Ownership Related to Corporate Social Responsibility? The Nonlinear Relation and Its Implication for Stock Return Volatility (2015, positive): “Following Jo and Harjoto (2011) and Kim et al. (2012), we also exclude corporate governance as it is often considered as a distinct construct from CSR.”
Strategic CSR: A Concept Building Meta‐Analysis (2019, positive): “While investment analysts used to give negative investment recommendations for firms with high CSR ratings in the early nineties, they often perceive CSR as a legitimate and even positive signal of a firm’s future profitability today (Ioannou and Serafeim, 2015).”
A Review of the Nonmarket Strategy Literature (2016, neutral): “Ioannou and Serafeim (2015) found that because of the legitimization of CSR practices, sell-side analysts’ pessimism over high CSR scores diminished over time, and highly informed and experienced analysts were the first to be less pessimistic about firms with high CSR scores.”
Role of Country- and Firm-Level Determinants in Environmental, Social, and Governance Disclosure (2016, neutral): “In addition, we do not use KLD because it provides company ratings on the basis of strength (i.e., a positive screen) or concern (i.e., a negative screen), and therefore, does not reflect a firm’s specific level of disclosure (see Ioannou and Serafeim 2015).”
Corporate Environmental Responsibility and Firm Risk (2015, background): “Previous studies on CSR (Jo and Harjoto 2011, 2012; Ioannou and Serafeim 2014) suggest that a firm’s CSR engagement is an endogenous variable.”
Board Diversity and Corporate Social Disclosure: Evidence from Vietnam (2016, positive): “The literature notes that shareholders are considered one of the most important stakeholder groups regarding CSD (Aerts et al. 2007, 2008; Berthelot et al. 2012; Clarkson et al. 2013; Cormier et al. 2011; Dhaliwal et al. 2011, 2012; Ioannou and Serafeim 2015).”