Peer Effects of Corporate Social Responsibility

We investigate how firms react to their peers’ commitment to corporate social responsibility (CSR), using a regression discontinuity design that relies on the passing or failing of CSR proposals by a small margin of votes during shareholder meetings. We find the passage of a close-call CSR proposal is followed by the adoption of similar CSR practices by peer firms, especially those with similar products and followed by more financial analysts. Stock returns around the voting dates are lower for peers with higher financial constraints in a competing relationship, but higher for peers in an alliance partnership with the voting firm.