Institute for Research on Labor and Employment
Do Ratings of Firms Converge? Implications for Strategy Research
- Author(s): Chatterji, Aaron
- Durand, Rodolphe
- Levine, David
- Touboul, Samuel
- et al.
Raters of corporations play an important role in assessing domains ranging from sustainability to corporate governance to best workplaces. Scholars increasingly rely on these ratings to test theories about corporate social responsibility (CSR), corporate governance and the influence of stakeholders. Though these raters frequently develop sophisticated methodologies, we find they often diverge in their ratings of the same firm, creating uncertainty for managers and stakeholders, and also posing challenges for researchers. We document the surprising lack of convergence of social ratings for the first time using six well-established socially responsible investing (SRI) raters, with comparisons of overlap, correlations, and regression analysis. Our results suggest that scholars should interpret empirical results with caution and at least use multiple ratings schemes in studies of CSR and governance.