The firm under the spotlight: How stakeholder scrutiny shapes corporate social responsibility and its influence on performance

Abstract

.Since stakeholders cannot directly observe corporate social responsibility (CSR)efforts, companies attempt to back up their increasing sustainability claims by send-ing CSR signals. The environment in which signaling takes place influences the credi-bility of the signals. Among the factors that make up the signaling environment, theoverall exposure of the company to different stakeholders (i.e., stakeholder scrutiny)has been neglected by the literature. Using signaling and stakeholder theories, weargue how stakeholder scrutiny shapes CSR signals' credibility. We empirically ana-lyze a sample of 5762 firms across several sectors from 23 developed countries from2013 to 2017. Stakeholder scrutiny exercises a positive effect on the credibility ofCSR signals through a mediated-moderated impact of CSR (across environmental,social, and governance dimensions) on firm performance