CSR Performance and Firm Value: Disentangling the Role of ESG Rating Providers

We study the impact on firm valuation of a novel exogenous shock to environmental, social, and governance (ESG) data that affects how firms’ corporate social responsibility (CSR) gets measured by a third-party ESG data provider. Our analysis reveals a significantly higher sensitivity of firm values to CSR ratings for firms whose CSR ratings were affected by the change in ESG reporting methodology. Moreover, firms with low capital constraints or low institutional ownership tend to drive the value sensitivity of CSR ratings when ESG reporting gets revamped. These findings provide insight into how ESG rating providers could influence and shape firms’ actual CSR engagement.