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How firms respond to being rated

Publication ,  Journal Article
Chatterji, AK; Toffel, MW
Published in: Strategic Management Journal
September 1, 2010

While many rating systems seek to help buyers overcome information asymmetries when making purchasing decisions, we investigate how these ratings also influence the companies being rated. We hypothesize that ratings are particularly likely to spur responses from firms that receive poor ratings, and especially those that face lower-cost opportunities to improve or that anticipate greater benefits from doing do. We test our hypotheses in the context of corporate environmental ratings that guide investors to select 'socially responsible,' and avoid 'socially irresponsible,' companies. We examine how several hundred firms responded to corporate environmental ratings issued by a prominent independent social rating agency, and take advantage of an exogenous shock that occurred when the agency expanded the scope of its ratings. Our study is among the first to theorize about the impact of ratings on subsequent performance, and we introduce important contingencies that influence firm response. These theoretical advances inform stakeholder theory, institutional theory, and economic theory. Copyright © 2010 John Wiley & Sons, Ltd.

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Published In

Strategic Management Journal

DOI

EISSN

1097-0266

ISSN

0143-2095

Publication Date

September 1, 2010

Volume

31

Issue

9

Start / End Page

917 / 945

Related Subject Headings

  • Business & Management
  • 3507 Strategy, management and organisational behaviour
  • 1505 Marketing
  • 1503 Business and Management
 

Citation

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Chatterji, A. K., & Toffel, M. W. (2010). How firms respond to being rated. Strategic Management Journal, 31(9), 917–945. https://doi.org/10.1002/smj.840
Chatterji, A. K., and M. W. Toffel. “How firms respond to being rated.” Strategic Management Journal 31, no. 9 (September 1, 2010): 917–45. https://doi.org/10.1002/smj.840.
Chatterji AK, Toffel MW. How firms respond to being rated. Strategic Management Journal. 2010 Sep 1;31(9):917–45.
Chatterji, A. K., and M. W. Toffel. “How firms respond to being rated.” Strategic Management Journal, vol. 31, no. 9, Sept. 2010, pp. 917–45. Scopus, doi:10.1002/smj.840.
Chatterji AK, Toffel MW. How firms respond to being rated. Strategic Management Journal. 2010 Sep 1;31(9):917–945.
Journal cover image

Published In

Strategic Management Journal

DOI

EISSN

1097-0266

ISSN

0143-2095

Publication Date

September 1, 2010

Volume

31

Issue

9

Start / End Page

917 / 945

Related Subject Headings

  • Business & Management
  • 3507 Strategy, management and organisational behaviour
  • 1505 Marketing
  • 1503 Business and Management