The value of a company’s ethical reputation has become a focal point for management researchers. We seek to join this conversation and extend the research centered on a firm’s ethical reputation. We accomplish this by shifting our focus away from its impact on external stakeholders to its impact on internal stakeholders. To this end, we rely on signaling theory to explain why a firm’s ethical reputation matters to its employees in an effort to bridge the macro–micro research gap. Across two (...) studies, we propose and demonstrate that a firm’s ethical reputation impacts employee subjective career success in form of career opportunities and work–life balance. Given our signaling theory framework, we also identify and explain when two industry-level characteristics operate as boundary conditions that distort a firm’s ethical reputation signaling properties. Specifically, the results demonstrate that a firm’s ethical reputation is positively related to employees’ perceptions of career opportunities and work–life balance. The results of our studies also demonstrate that the relatively high levels of industry competition and industry regulation weaken the positive impact of a firm’s ethical reputation on career opportunities and work–life balance. Theoretical and practical implications are discussed. (shrink)

An emerging body of literature has highlighted a gap in our understanding of the extent to which the salience attached to human rights is likely to influence the extent to which an individual takes account of Corporate Social Responsibility (CSR) in decision making. The primary aim of this study is to begin to address this gap by understanding how individuals attribute different emphasis on specific aspects of human rights when making decisions to purchase, work, invest or support the community operations (...) for socially responsible organisations. In order to achieve this objective, a survey instrument was administered to professionals in Russia and Bulgaria. Our data indicate that there is a significant correlation between individuals’ sensitivity towards different components of human rights and their perceptions of the importance of CSR in decision making. Specifically, the recognition of political rights was strongly associated with the willingness to purchase, invest, seek employment and support socially responsible firms. Our analysis also outlines significant differences between the Russian and the Bulgarian samples with regard to the manners in which individuals rate the importance of civil, political and economic human rights. (shrink)

An emerging body of literature has highlighted a gap in our understanding of the extent to which the salience attached to human rights is likely to influence the extent to which an individual takes account of Corporate Social Responsibility in decision making. The primary aim of this study is to begin to address this gap by understanding how individuals attribute different emphasis on specific aspects of human rights when making decisions to purchase, work, invest or support the community operations for (...) socially responsible organisations. In order to achieve this objective, a survey instrument was administered to professionals in Russia and Bulgaria. Our data indicate that there is a significant correlation between individuals’ sensitivity towards different components of human rights and their perceptions of the importance of CSR in decision making. Specifically, the recognition of political rights was strongly associated with the willingness to purchase, invest, seek employment and support socially responsible firms. Our analysis also outlines significant differences between the Russian and the Bulgarian samples with regard to the manners in which individuals rate the importance of civil, political and economic human rights. (shrink)

We investigate the role of personal values in an investment decision in a controlled experimental setting. Participants were asked to choose an investment in a bond issued by a tobacco company or a bond issued by a non-tobacco company that offered an equal or sometimes lower yield. We then surveyed the participants regarding their feelings toward tobacco use to determine whether these values influenced their investment decision. Using factor analysis, we identified investment- and tobacco-related dimensions on which participants’ responses tended (...) to load. Two of these factors, relating to the societal impact of investment decisions and the health effects of tobacco, were highly significant in determining whether participants selected a tobacco or non-tobacco related investment. More importantly, we found that when the rate of return on a tobacco-related investment exceeds the rate of return on an investment not involving tobacco by 1%, the intensity of participant concerns about the societal effects of their investment decisions was especially important in determining investment choices. This finding indicates that traditional wealth-maximization approaches, which do not consider the personal values of the investor, omit an important factor that affects investment decisions. (shrink)

We investigate the role of personal values in an investment decision in a controlled experimental setting. Participants were asked to choose an investment in a bond issued by a tobacco company or a bond issued by a non-tobacco company that offered an equal or sometimes lower yield. We then surveyed the participants regarding their feelings toward tobacco use to determine whether these values influenced their investment decision. Using factor analysis, we identified investment- and tobacco-related dimensions on which participants’ responses tended (...) to load. Two of these factors, relating to the societal impact of investment decisions and the health effects of tobacco, were highly significant in determining whether participants selected a tobacco or non-tobacco related investment. More importantly, we found that when the rate of return on a tobacco-related investment exceeds the rate of return on an investment not involving tobacco by 1%, the intensity of participant concerns about the societal effects of their investment decisions was especially important in determining investment choices. This finding indicates that traditional wealth-maximization approaches, which do not consider the personal values of the investor, omit an important factor that affects investment decisions. (shrink)

This article addresses the growing industry of retail socially responsible investment (SRI) profiled mutual funds. Very few previous studies have examined the final consumer of SRI profiled mutual funds. Therefore, the purpose of this study was to, in an exploratory manner, examine the impact of a number of pro-social, financial performance, and socio-demographic variables on SRI behavior in order to explain why investors choose to invest different proportions of their investment portfolio in SRI profiled funds. An ordinal logistic regression analysis (...) on 528 private investors revealed that two of the three pro-social variables had a positive impact on how much the consumer invested in SRI profiled funds. Moreover, there was proof of a non-altruistic motive for investing in SRI as consumers who perceive that financial return of SRI is equal or better than "regular" mutual funds, invested a greater proportion of their portfolio in SRI profiled mutual funds. Furthermore, the results showed that women and better-educated investors were more likely to invest a greater proportion of their investment portfolio in SRI. Overall, the findings indicate that both financial perceptions and pro-social attitudes are connected to consumer investment in SRI. (shrink)

This paper examines the antecedents of organizational commitment for adopting corporate environmental responsibility and green practices in the case of the logistics industry in South Korea. Seven hundred and eighty employees and top management from logistics companies were sampled. The data were analyzed using factor analysis, structural equation modeling techniques, and one-way analysis of variance. The results showed that social expectations, organizational support, and stakeholder pressure were the important antecedents for the adoption of corporate environmental responsibility and green practices. In (...) the path analysis, social expectations had the greatest impact on both stakeholder pressure and green practice adoption. Moreover, we found that the higher the job titles were, the more willing they were to adopt green practices. This indicated that the current top management of Korean logistics companies is well aware of being mandated to make a commitment to corporate environmental responsibility and green practices. (shrink)

We introduce nudges in order to incite investors to choose Socially Responsible Investment funds instead of traditional funds. We have set up two online experiments with a total of 713 US retail investors, using three types of nudges to elicit their effects on investors’ SRI investments level: making SRI the default investment, introducing a SRI explanation message, and priming ethical values by displaying shocking images. Making SRI the default option is the most efficient nudge to influence investors towards SRI. Its (...) effect is twofold. First, around 50% of investors do not opt-out of the default allocation. Second, even investors who opt-out of the default allocation invest more in SRI than those in the control group, an effect that appears driven by anchoring. Although investors subjected to both priming and message content marginally increase their SRI investment, priming or message content in isolation appears to have a non-significant influence. For choice architects who want to steer retail investors towards SRI funds, making them the default option appears to be the most powerful nudge. (shrink)

Corporate, Social, Ethical and Environmental Reporting should ideally discharge the accountability of an organisation to its stakeholders. Voluntary reporting has been characterised by a dearth of neutral and objective information such that the advocates of SEER recommend that it be made compulsory. Their underlying rationale is that legally specified disclosure requirements and enforcement mechanisms will enhance the quality of such reporting. This paper sets out to explore how realistic this scenario actually is, in view of the conflicting interpretations in the (...) literature on this subject. To that end, a survey of the reporting patterns of 78 of the largest Spanish companies between 2001 and 2003 examines the extent of their compliance with the ICAC-2002 standard, which obliged them to make environmental disclosures in their financial statements. The results suggest that progressive and improved regulation could increase the volume and quality of SEER disclosures. They also suggest, however, that persistent non-compliance means that the problems associated with voluntary disclosure still exist. Finally, through an impression management perspective, the study reveals, the diverse strategies, ranging from dismissal to concealment, that are employed by companies to avoid transparency. As regulation improves and enforcement expectations rise, it becomes more difficult to dismiss compulsory reporting norms. As a result, some firms engage in more complex concealment strategies to attain corporate legitimacy, depriving stakeholders of regulatory information. The latter point serves to reconcile apparently contradictory explanations in the literature as to whether legitimacy theory might explain partial compliance with SEER regulation. (shrink)

Corporate, Social, Ethical and Environmental Reporting should ideally discharge the accountability of an organisation to its stakeholders. Voluntary reporting has been characterised by a dearth of neutral and objective information such that the advocates of SEER recommend that it be made compulsory. Their underlying rationale is that legally specified disclosure requirements and enforcement mechanisms will enhance the quality of such reporting. This paper sets out to explore how realistic this scenario actually is, in view of the conflicting interpretations in the (...) literature on this subject. To that end, a survey of the reporting patterns of 78 of the largest Spanish companies between 2001 and 2003 examines the extent of their compliance with the ICAC-2002 standard, which obliged them to make environmental disclosures in their financial statements. The results suggest that progressive and improved regulation could increase the volume and quality of SEER disclosures. They also suggest, however, that persistent non-compliance means that the problems associated with voluntary disclosure still exist. Finally, through an impression management perspective, the study reveals, the diverse strategies, ranging from dismissal to concealment, that are employed by companies to avoid transparency. As regulation improves and enforcement expectations rise, it becomes more difficult to dismiss compulsory reporting norms. As a result, some firms engage in more complex concealment strategies to attain corporate legitimacy, depriving stakeholders of regulatory information. The latter point serves to reconcile apparently contradictory explanations in the literature as to whether legitimacy theory might explain partial compliance with SEER regulation. (shrink)

In this study, we explore how investors reconcile information on firms’ social responsibility with analysts’ assessments of future firm risk in the pricing of long-term bonds. We ask whether investors pay attention to small strides toward and/or small slips away from socially responsible behavior, arguing that analysts’ corporate bias toward gains and against losses influences investor reactions to corporate social responsibility. We hypothesize that analysts notice and reward improvements in social responsibility, yet excuse lapses. We find support for this hypothesis, (...) using a unique dataset of long-term bonds that combines lagged measures of firm-level financial and social performance with bond-specific data pertaining to risk of default and pricing. The empirically robust asymmetry in investor responses to small but often cumulative increases versus decreases in corporate social responsibility reveals an under-examined root cause of longer-term, larger-scale distortions in financial market returns regarding corporate social performance. Our findings elaborate earlier behavioral research on how corporate bias influences analysts’ short-term assessments of economic risk, by theorizing why this corporate bias may influence long-term assessments of social risk. Our work also motivates more critical scrutiny of the role analysts play in revising the future risk of today’s social action versus inaction. (shrink)

The aim of this paper is to calculate the market valuation of non-financial characteristics, namely, the social responsibility criteria included in the Spanish Socially Responsible Investment Funds. The hedonic price method is applied for this purpose. This method relates the price of Socially Responsible Investment Funds with both financial and social responsibility characteristics. Because of the large number of social responsibility characteristics included in these funds, prior to application of the hedonic price method, the principal components factor analysis technique is (...) used. The data are taken from the prospectus for each fund and from the data provided by the National Securities Market Commission. Results indicate that the Spanish market is sensitive to the social responsibility practices of companies. In particular, the market value practices related to environmental sustainability, the enforcement of labour rights, sustainable production and consumption and non-abusive market practices. (shrink)

In this article, we empirically assess the impact of corporate ethical identity (CEI) on a firm's financial performance. Drawing on formulations of normative and instrumental stakeholder theory, we argue that firms with a strong ethical identity achieve a greater degree of stakeholder satisfaction (SS), which, in turn, positively influences a firm's financial performance. We analyze two dimensions of the CEI of firms: corporate revealed ethics and corporate applied ethics. Our results indicate that revealed ethics has informational worth and enhances shareholder (...) value, whereas applied ethics has a positive impact through the improvement of SS. However, revealed ethics by itself (i.e. decoupled from ethical initiatives) is not sufficient to boost economic performance. (shrink)