How firms respond to being rated
By: Aaron K. Chatterji, Michael W. Toffel
Contributors: Toffel, Michael W.; Harvard Business School
Edition: 5th Rev.
Series: Working paper / Harvard Business School -- 08-025; Working paper (Harvard Business School) -- 08-025.
Publisher: Harvard Business School
Published: 2009
Place of publication: [Boston]
Language: eng
Number of pages: 50
Description: While many rating systems seek to help buyers overcome information asymmetries when making purchasing decisions, we investigate how these ratings also influence the companies being rated. We hypothesize that ratings are particularly likely to spur responses from firms that receive poor ratings, and especially those that face lower-cost opportunities to improve or that anticipate greater benefits from doing so. We test our hypotheses in the context of corporate environmental ratings that guide investors to select "socially responsible," and avoid "socially irresponsible," companies. We examine how several hundred firms respond to corporate environmental ratings issued by a prominent independent social rating agency, and take advantage of an exogenous shock that occurred when the agency expanded the scope of its ratings. Our study is among the first to theorize about the impact of ratings on subsequent performance, and we introduce important contingencies that influence firm response. These theoretical advances inform stakeholder theory, institutional theory, and economic theory.
Notes: Originally published as: Shamed and able: how firms respond to information disclosure. October 2007.

"Revised ... June 2009"--Publisher's website.

Includes bibliographical references.