Carrot and Stick? The Role of Financial Market Intermediaries in Corporate Social Performance

Rieneke Slager, Wendy Chapple

Research output: Contribution to journalArticleAcademicpeer-review

21 Citations (Scopus)

Abstract

This article examines the role of intermediaries in financial markets in fostering corporate sustainability. Responsible investment (RI) indices have been primarily identified as intermediaries that provide information regarding corporate social performance (CSP) for investors and other stakeholders. The authors argue that the role of these intermediaries is not confined solely to information provision, but they may also incentivize high levels of CSP through mechanisms such as exclusion threats, signaling, and engagement. The authors rely on unique access to the archives of the FTSE4Good Index to examine the effects of these mechanisms on CSP. The study shows that companies facing exclusion threats and signaling are more likely to comply with the intermediary’s criteria, and medium levels of engagement leads to higher levels of CSP. The authors contribute to the study of sustainability in financial markets by explicating the mechanisms that intermediaries and other financial actors could employ to foster greater corporate sustainability.
Original languageEnglish
Pages (from-to)398-426
Number of pages29
JournalBusiness & Society
Volume55
Issue number3
DOIs
Publication statusPublished - 1-Mar-2016
Externally publishedYes

Keywords

  • RI indices
  • corporate social performance (CSP)
  • engagement
  • intermediaries

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