Manager see manager do: the impact of geographic herding on corporate social responsibility

Abstract

Purpose

The authors examine how local firms, regardless of industry, influence each other's corporate policies. The authors argue that there are two motives for why local firms may have similar corporate social responsibility (CSR) policies. First, the peer effect argues that a firm's chief executive officer (CEO) will likely interact regularly with fellow CEOs of local firms, especially those of similar size, influencing each other's firm to make similar decisions. Second, firms may believe that CSR policies can be used to attract local talent. That is, if there are many firms in the area, employees may elect to work for the firm that treats their employees better or shares their values. Thus, to compete for labor resources, local firms will herd in similar CSR policies.

Design/methodology/approach

Through regression analysis, the authors compare a firm's CSR policies to the policies of other firms in the geographic area (within 100 miles).

Findings

The authors find support for the peer effect hypothesis, as local firms of the same size positively and significantly affect a firm's own CSR score. In contrast, local firms of different sizes have a negative relationship. The combination of CSR scores being related to the CSR scores of similar sized firms and not to other size firms suggest that the peer effect dominates the labor pool effect.

Originality/value

Through regression analysis, the authors compare a firm's CSR policies to the policies of other firms in the geographic area.

Citation

Nofsinger, J., Patterson, F.M. and Shank, C. (2023), "Manager see manager do: the impact of geographic herding on corporate social responsibility", International Journal of Managerial Finance, Vol. 19 No. 2, pp. 233-247. https://doi.org/10.1108/IJMF-12-2020-0610