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Open Access Publications from the University of California

Imitate or Differentiate? Evaluating the validity of corporate social responsibility ratings

  • Author(s): Chatterji, Aaron K;
  • Levine, David I. I.
  • et al.

Although there is $2 trillion in portfolios using socially responsible investing (SRI) criteria, it remains unclear how to measure “social responsibility.” We explore competing theoretical perspectives that explain the level of convergent and predictive validity across SRI ratings produced by competing social raters. While some prior literature predicts low convergent validity due to desire for differentiation, other work predicts high convergent validity driven by high true validity or by neo-institutionalist forces that reward imitation. We find that these ratings have low correlations and that firms with high and low social ratings are equally likely to be later embroiled in scandals.

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