CSR Information AND Regulatory Activity

I investigate how regulators adjust their enforcement activity in response to a firm’s corporate social responsibility (CSR) information. Using exogenous variation in CSR rating coverage and enforcement data from the U.S. Occupational Safety and Health Administration (OSHA), I find that regulators increase enforcement activity on newly CSR-covered firms. I explore two non-mutually exclusive mechanisms that can explain my findings: regulatory learning and firms’ reputational exposure after the CSR coverage. My results are consistent with firms’ CSR-related reputation and visibility being a more plausible channel. Regulators increase enforcement activity on firms with higher visibility as they can experience a larger deterrence effect after the CSR coverage. Evidence from institutional investor holdings corroborates the reputational mechanism. Finally, I document evidence of a spill-over effect on peer firms as they exhibit increased compliance efforts following a violation by a focal firm. Collectively, my findings provide novel insights on the role of CSR information in regulatory activity.