CSR Information and Regulatory Activity

I investigate how regulator adjusts enforcement activity in response to firm’s corporate social responsibility (CSR) information. Using exogenous variation in CSR ratings coverage and enforcement data from the Occupational Safety and Health Administration (OSHA), I find that regulator increases enforcement activity toward newly CSR covered firms. I explore two non-mutually exclusive mechanisms that can explain my main results: 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. Regulator increases enforcement activity for firms with higher visibility as they can experience a larger deterrence effect after the CSR rating 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, which leads to a decline in its CSR ratings. Collectively, my findings provide novel evidence of the role of CSR information in regulatory activity