Strategic Change and Firms’ Optimal Distinctiveness: The Moderating Effect of Analyst Coverage

Abstract Drawing from optimal distinctiveness research, we explore the effect of strategic change on corporate social responsibility (CSR) activities in the context of CSR conformity and CSR differentiation. Additionally, we examine whether analyst coverage as a key external boundary condition can influence the magnitude of such an effect. Analysing an unbalanced panel of 2145 firm‐year observations with 422 firms over the period 2004–2013, we found support for our predictions that while strategic change negatively and significantly affects CSR conformity, it positively and significantly impacts CSR differentiation. Additionally, our results show that analyst coverage strengthens the relationship between strategic change CSR conformity and CSR differentiation. Our findings expand the optimal distinctiveness, strategic change, and analyst coverage literature and provide insights into the complex and multifaceted aspects of CSR activities. Finally, this study's findings can equip strategic leaders and investors with knowledge as they face complex decision‐making in their firms and investments.