Local peer effects of corporate social responsibility

This paper investigates the local peer effects of corporate social responsibility (CSR). We find that a firm's CSR engagement comoves with that of other firms headquartered nearby. The results are robust when considering the nonlocal dominant industry CSR portfolio and different cross-region sensitivities to macro shocks. Moreover, the CSR of firms that change their headquarters location experiences an increase (decrease) in comovement with the CSR of firms in the new (old) location. We further explore several channels through which the local CSR comovement is motivated. We show that local CSR comovement is mainly driven by a firm's incentives to access financing. Besides, we find weak evidence that firms comove in CSR in order to set a positive image to the public and our findings do not support the agency channel of the local peer effects of CSR.