The firm under the spotlight: how stakeholder scrutiny shapes corporate social responsibility and its influence on performance

F.J. Forcadell, A. Lorena, E. Aracil

Corporate Social Responsibility and Environmental Management Vol. 30, nº. 3, pp. 1258 - 1272

Summary:

Since stakeholders cannot directly observe corporate social responsibility (CSR) efforts, companies attempt to back up their increasing sustainability claims by sending CSR signals. The environment in which signaling takes place influences the credibility of the signals. Among the factors that make up the signaling environment, the overall exposure of the company to different stakeholders (i.e., stakeholder scrutiny) has been neglected by the literature. Using signaling and stakeholder theories, we argue how stakeholder scrutiny shapes CSR signals' credibility. We empirically analyze a sample of 5762 firms across several sectors from 23 developed countries from 2013 to 2017. Stakeholder scrutiny exercises a positive effect on the credibility of CSR signals through a mediated-moderated impact of CSR (across environmental, social, and governance dimensions) on firm performance.

Spanish layman's summary:

Analizamos el efecto del escrutinio de los stakeholders sobre ESG y desempeño corporativo. Sobre una muestra de 5762 empresas, concluimos que el valor instrumental de ESG crece a medida que se intensifica el escrutinio de los stakeholders. 

English layman's summary:

We analyze the effect of stakeholder scrutiny on ESG quality and on corporate performance. Over a 5762 firms-sample we find that intense scrutiny improves ESG quality and its impact on performance. That is, the instrumental value of ESG grows as stakeholder scrutiny intensifies.  

Keywords: corporate financial performance, corporate social responsibility, ESG, signaling theory, stakeholder engagement, stakeholder theory

JCR Impact Factor and WoS quartile: 9,800 - Q1 (2022)

DOI reference: https://doi.org/10.1002/csr.2417

Published on paper: May 2023.

Published on-line: November 2022.

Citation:
F.J. Forcadell, A. Lorena, E. Aracil, The firm under the spotlight: how stakeholder scrutiny shapes corporate social responsibility and its influence on performance. Corporate Social Responsibility and Environmental Management. Vol. 30, nº. 3, pp. 1258 - 1272, May 2023. [Online: November 2022]