UCL School of Management

Research seminar

Mathew Grimes Cambridge


Mathew Grimes, Cambridge


Wednesday, 25 May 2022
11:00 – 12:30
Seminar Suite L38 Canary Wharf
Research Group
Strategy and Entrepreneurship

UCL School of Management is delighted to welcome Mathew Grimes, Cambridge, to host a research seminar discussing: Falling Out of Frame: When Firms Benefit from Divergent ESG Ratings


Although most research argues that firms benefit from receiving a high social evaluation rating, recent studies have found surprising benefits of being rated in the middle or even toward the lower end of the industry, making it unclear when it is beneficial to be highly rated. We address these discrepant findings by examining when firms benefit from being rated high, low, and in the middle compared to their industry peers on environmental, social, and governance (ESG) ratings. Drawing on theory of firm classification, we argue that as new social evaluations are promoted, rating metric uncertainty encourages reliance on prototypical rather than goal-based assessments. Specifically, in the context of ESG ratings, shareholders’ attentional frames are narrowed to those firms that are most prototypical—those that conform to their industry’s normative ESG rating. While firms whose ratings diverge from industry norms are penalized for falling out of the frame, salient industry legitimacy threats reverse the effect, such that falling out of frame becomes beneficial. Moreover, we show the extent to which investors shift from prototypical to goal-based evaluation is contingent on the degree of overall industry ESG homogeneity and uncertainty of ESG ratings. For instance, in cases where greater ESG materiality reduces ratings uncertainty, investors shift toward goal-based evaluation, and only firms whose ratings positively diverge from the industry average ESG rating benefit. Our findings contribute to the literature on social evaluation ratings and ongoing theoretical debates regarding prototypical versus goal-based classification of firms.

Open to
PhD Programme
Last updated Thursday, 19 May 2022