Knowledge Creation

There are still many, many things we do not know about how taking a more sustainable approach to business can lead to better financial, social, and environmental outcomes for a wider range of stakeholders. We aspire to make the Center for Sustainable Business a world-renowned hub for applied research in the field of sustainable business models.

CSB Working Paper Series

"Firms and Social Responsibility: A Review of ESG and CSR Research in Corporate Finance"
Stuart L. Gillan, Terry College of Business, University of Georgia
Andrew Koch, Katz Graduate School of Business, University of Pittsburgh
Laura T. Starks, McCombs School of Business, University of Texas

Abstract: We review the financial economics-based research on ESG and CSR with emphasis on corporate finance. In doing so we focus on the most debated and researched questions: The relationships between firms with the highest ESG/CSR profiles and their market environments, their leadership, and their owners as well as how these firms' ESG/CSR profiles are linked to their risk, performance, and value.

"Women’s Activism, Corporate Identity, and Female Board Representation"
Michael Neureiter, Postdoctoral Fellow, University of Pittsburgh
CB Bhattacharya, H.J. Zoffer Chair of Sustainability & Ethics, Professor of Marketing and Management, University of Pittsburgh

Abstract: While there is ample evidence documenting the positive effect of women’s activism on female representation in politics, scholars know relatively little about its potential impact on gender diversity in the corporate world. We aim to fill this gap in the literature by providing the first empirical analysis of the relationship between women’s activism and female representation on corporate boards. Drawing on the extensive scholarship on social movements as well as original, qualitative interviews with representatives of women’s organizations, we argue that women’s activists use various strategies – empowering, informing, and shaming – to increase the number of women on corporate boards. In addition, we posit that the effect of women’s activism on female board representation is moderated by facets of corporate identity: it is greater for firms that are reputation-seeking and committed to corporate social responsibility, and it is smaller for firms with a right-wing political orientation. We test these propositions by analyzing firm- and country-level data on more than 3,000 companies from 35 countries over a period of ten years (2002-2011). Using linear regression models (i.e. OLS, Tobit, and 2SLS), we find support for all of our hypotheses. These results are reasonably robust to a variety of alternative model specifications, including an instrumental variable approach that mitigates concerns about reverse causality and omitted variable bias. Theoretical and practical implications are discussed. 

Keywords: Women’s activism; women’s movement; social movements; female representation; gender diversity; corporate identity

"Backup Analysis for Conversation Article"
CB Bhattacharya, H.J. Zoffer Chair in Sustainability & Ethics, Professor of Marketing and Management, University of Pittsburgh

Abstract: This document contains additional definitions and background analyses for an article published by CB Bhattacharya in The Conversation, a network of not-for-profit media outlets that publish news stories written by academics and researchers. The premise of this article is that having a higher purpose can help firms improve their sustainability performance as well as their financial performance. This article was also picked up by Fast Company.

"When and How Does Negative Publicity Lead to Better Financial Performance? Consumer Boycotts in the Age of Political Polarization"
Michael Neureiter, Postdoctoral Fellow, University of Pittsburgh
CB Bhattacharya, H.J. Zoffer Chair of Sustainability & Ethics, Professor of Marketing and Management, University of Pittsburgh

Abstract: This paper examines the effect of negative publicity on firms’ financial performance. We argue that whether public controversies increase or decrease financial performance is a function of the political environment in which firms operate. Specifically, we posit that in highly polarized political environments, negative publicity is likely to elicit a consumer boycott from one side of the political spectrum, which in turn will prompt those on the other side to support the company at the center of the controversy by purchasing more of its products. The additional sales from such counter-activism can not only offset but may even exceed the losses from the initial consumer boycott, thereby leading to a positive relationship between negative publicity and firm financial performance. We test this argument by analyzing data on 1,040 US firms over a period of ten years (2002-2011). Using both fixed effects and instrumental variable models, we find that negative publicity has a positive and significant effect on companies’ sales and revenue. In addition, our results suggest that public controversies had a negative effect on financial performance in the early 2000s. By the mid-2000s, this effect had turned positive and has become stronger since. This finding provides support for our argument that political polarization is the driving force behind the positive effect of negative publicity on financial performance, since the mid-2000s is around the time when political polarization accelerated in the United States.

Keywords: Negative publicity; consumer boycotts; consumer activism; social movements; political polarization