Do Returnee Executives Value Corporate Philanthropy? Evidence from China

Journal of Business Ethics - The initial online publication contained a typesetting mistake. The original article has been corrected.     

Do Announcements About Corporate Social Responsibility Create or Destroy Shareholder Wealth? Evidence from the UK

This paper investigates the stock market reaction to the announcement that a firm has been included in the UK FTSE4Good index of socially responsible firms. We use the announcement of firm inclusion in the index to estimate the stock market reaction to a firm being classified as socially responsible. This is an important test of whether investors view the undertaking of socially responsible activities by firms as a value increasing or value decreasing initiative by management. We do not find strong evidence in favour of a positive market reaction. However, there is a large cross-sectional variation in the market reaction to this announcement. Investors appear to be reacting to this event and there are a number of firm characteristics that are well-established proxies for CSR that can explain the market reaction.     

Do Auditors Applaud Corporate Environmental Performance? Evidence from China

This paper examines the relationship between turnover among chief executive officers (CEOs) and corporate sustainability performance (CSP) by identifying the influence of two major types of succession to the top job (internal or external promotion) and the reasons for change. Our model also integrates the firm’s past prioritization of CSP and the impact of a company’s participation in the Global Reporting Initiative (GRI). Upper echelons theory and agency theory frameworks are adopted to understand CSP. Using an analysis of panel data for 88 public companies across 13 years in France, we find that a change of chief executive has a positive and significant effect on CSP 5 years after the change. This positive effect is stronger when the new CEO is recruited from outside the firm. The impact on CSP is invariably positive and significant, except for voluntary departures. The arrival of a new CEO affects CSP less when the firm has already achieved a high standard of CSP and participates in the GRI. These results are obtained after controlling CSP determinants already validated in the literature (financial performance, size, profitability, etc.). The findings show that expectations of CEOs are not solely economic and financial but also concern CSP. In terms of governance, they should prompt shareholders looking to strengthen CSP to choose new CEOs from outside the firm and to encourage the firm to participate in the GRI.     

Do Stock Investors Value Corporate Sustainability? Evidence from an Event Study

This paper analyzes the impacts of index inclusions and exclusions on corporate sustainable firms by studying a sample of US stocks that are added to or deleted from the Dow Jones Sustainability World Index over the period 2002?C2008. The impacts are measured in terms of stock return, risk and liquidity. We cannot find any strong evidence that announcement per se has any significant impact on stock return and risk. However, on the day of change, index inclusion (exclusion) stocks experience a significant but temporary increase (decrease) in stock return. Liquidity deteriorates after the announcement day and bounces back significantly near the day of change. Systematic risk shows little change after announce- ments. But, idiosyncratic risk is higher after announcements. The overall results support Harris and Eitan??s (The Journal of Finance 41(4), 815?C829, 1986) price pressure hypothesis, which posits that event announcement does not carry information and any shift in demand (and hence the corresponding price change and liquidity change) is temporary.     

Does Corporate Social Responsibility Influence Firm Performance? Empirical Evidence from Harare,Zimbabwe

The influence of the dimensions of corporate social responsibility on firm performance are tested in Harare, Zimbabwe using perceptual data from a sample of 155 firms over a period of three years. Structural equation modeling was used to test the research hypotheses. The study found that employee relations, customer relations, community relations and investor relations all had a positive effect on firm performance. Environmental relations, diversity relations and supplier relations all did not influence firm performance. The study has implications on theory, policy and practice, and future research.     

Managerial Talent and Corporate Social Responsibility (CSR): How Do Talented Managers View Corporate Social Responsibility?

Motivated by the ongoing debate on the costs and benefits of corporate social responsibility (CSR), we explore how talented managers view CSR investments. Based on nearly 20,000 observations across 17 years, our evidence reveals a nonmonotonic effect of managerial talent on CSR. Exploiting a novel measure of managerial ability, we find that talented managers view CSR investments favorably. However, only those with especially strong talent are in favor of CSR investments. For executives ranked above the 75th percentile in terms of managerial talent, an increase in managerial ability leads to more CSR investments, suggesting that these strongly talented managers perceive CSR as enhancing firm performance. In contrast, for those with weaker talent, CSR investments are negatively associated with managerial ability, implying that these weakly talented managers view CSR as a wasteful deployment of resources. Further evidence shows that our conclusion is unlikely confounded by endogeneity.     

How Does Corporate Social Responsibility Affect Corporate Continuous Innovation?

From the perspective of sustainable development, this paper analyzes the impact of corporate social responsibility (CSR) on the corporate continuous innovation based on the theory of innovation economics and the demand for innovationdriven development, and then conducts a series of empirical tests based on a sample of Chinese A-shared listed companies from 2008 to 2016. The results show that better CSR performance is conducive to the continuous innovation, and this positive relationship is more pronounced for firms with voluntary accounting information disclosure, for firms of non-high-technology industries, and when policy uncertainty is high. This paper not only enriches the literature on CSR but also provides theoretical references for the innovation practice of enterprises under the innovation-driven strategy.     

Do Leveraged Firms Underinvest in Corporate Social Responsibility? Evidence from Health and Safety Programs in U.S. Firms

The explosion of health-related costs in U.S. firms over more than a decade is a huge concern for managers. The initiation of Health and Safety (H&;S) programs at the firm level is an adequate Corporate Social Responsibility (CSR) initiative to contain this evolution. However, in spite of their documented efficiency, firms underinvest in those programs. This appears as a puzzle for health economists. In this paper, we uncover a strong negative relation of financial leverage to the implementation of H&;S programs. The negative impact of debt on investment and CSR activities is generally interpreted as an efficient disciplinary effect of debt on managers. H&;S are particularly well suited to revisit this evidence, given their strong profitability and homogeneity across firms. Very interestingly, the negative effect is stronger for firms with high free cash flows, for which debt is used to prevent overinvestment. This strongly suggests that debt, while disciplining managers, also discourages investments which are valuable both for firms and society.     

Does Corporate Social Responsibility Affect Information Asymmetry?

In this study, we examine the empirical association between corporate social responsibility (CSR) and information asymmetry by investigating their simultaneous and endogenous effects. Employing an extensive U.S. sample, we find an inverse association between CSR engagement and the proxies of information asymmetry after controlling for various firm characteristics. The results hold using 2SLS considering the reverse side of information asymmetry influencing CSR activities. The results also hold after mitigating endogeneity based on the dynamic panel system generalized method of moment. Furthermore, the CSR–information asymmetry relation is amplified in high-risk firms due to managers’ efforts to build a good reputation. Last, we find that CSR engagement is inversely associated with reputational risk measure and lower predicted value of reputational risk is positively associated with lower information asymmetry measures. We interpret these results as supporting the stakeholder theory-based, reputation-building explanation that considers CSR engagement as a vehicle to build and maintain firm reputation thereby enhancing the information environment.     

Corporate Social Responsibility–Oriented Compliances and SMEs Access to Global Market: Evidence from Bangladesh

The convergence of corporate social responsibility (CSR) and corporate governance has immense impact on the participants in global supply chains. The global buyers and retailers tend to incorporate CSR in all stages of product manufacturing within their supply chains. The incorporated CSR thus creates the difficulty to small- and medium-sized manufacturing enterprises (SMEs). Incompetence in standardized CSR practices is an important issue that causes SMEs either losing their scope to access global market directly or serving as subcontractors to large enterprises. This article explores this issue by focusing on Bangladeshi SMEs under the CSR requirement of the important global buyer.     

Do Suppliers Applaud Corporate Social Performance?

The influence of corporate social performance (CSP) on stakeholders is one of the focal issues in corporate social responsibility (CSR) research. Using data of listed companies in China, this paper examines whether CSR behavior in the form of charitable donations garners a positive reaction from suppliers. Results derived from both level and change model regressions show that superior CSP makes it easier for a firm to obtain trade credit from suppliers, although the effect is significant only in non-state-owned enterprises (non-SOEs). The results are robust to various measures of CSP and endogeneity tests. The results support the strategic philanthropy view and apply stakeholder theory in supply chain, that strategic CSR can help firms to attract suppliers and consolidate cooperative relationships with them, which in turn benefits the firms in terms of more trade credit financing from suppliers. This paper also shows that state-owned enterprises and non-SOEs have different CSR intentions and use CSR to achieve strategic goals in different ways. The conclusions drawn from this study provide practical guidance on CSR strategy, suggesting that CSR activities can help a firm in transition economies to enhance its corporate image, establish and consolidate the good relationship with suppliers, and obtain economic benefits or achieve long-term business objectives.     

Corporate Social Responsibility in SMEs: A Shift from Philanthropy to Institutional Works?

For Aristotle, virtues are neither transcendent nor universal, but socially interdependent; they need to be understood chronologically and with respect to character and context. This paper uses an Aristotelian lens to analyse an especially interesting context in which to study virtue—the state’s response when social order breaks down. During such periods, questions relating to right action by citizens, the state, and state agents are pronounced. To study this, we analyse data from interviews, observation, and documents gathered during a 3-year study of riot policing in the U.K. In doing so, we contribute by joining a number of other conversations within JBE, suggesting detailed empirical examination of this context is useful in opening up considerations relevant to ‘virtue’ elsewhere. This extreme context helps us raise interesting and empirically informed questions that can encourage future theoretical and empirical contributions to virtue in business ethics. One such question is on the role of habituation in virtue, which is not just the inculcation of a reflex or automaticity, but can also refer to a trained and developed tendency to behave in the right way, for the right reasons, at the right time. Whilst we stop short of a simplistic alignment of habituation and virtue, we show ways in which it can inform understanding of both courage and phronēsis.     

Does Corporate Social Responsibility Matter in Asian Emerging Markets?

This study addresses the question whether corporate social responsibility (CSR) matters in Asian Emerging Markets. Based on CSR scores compiled by Credit Lyonnais Securities (Asia), we assess the CSR performance of major Asian firms over a period of 3 years, from 2001 to 2004. The results show that there is a positive and significant relation between CSR and market valuation among Asian firms. We further find that CSR is positively related to the market valuation of the subsequent year. More importantly, Asian firms are rewarded by the market for improving their CSR practice.     

Corporate Social Responsibility in Challenging and Non-enabling Institutional Contexts: Do Institutional Voids matter?

The extant literature on comparative Corporate Social Responsibility (CSR) often assumes functioning and enabling institutional arrangements, such as strong government, market and civil society, as a necessary condition for responsible business practices. Setting aside this dominant assumption and drawing insights from a case study of Fidelity Bank, Nigeria, we explore why and how firms still pursue and enact responsible business practices in what could be described as challenging and non-enabling institutional contexts for CSR. Our findings suggest that responsible business practices in such contexts are often anchored on some CSR adaptive mechanisms. These mechanisms uniquely complement themselves and inform CSR strategies. The CSR adaptive mechanisms and strategies, in combination and in complementarity, then act as an institutional buffer (i.e. ‘institutional immunity’), which enables firms to successfully engage in responsible practices irrespective of their weak institutional settings. We leverage this understanding to contribute to CSR in developing economies, often characterised by challenging and non-enabling institutional contexts. The research, policy and practice implications are also discussed.     

Which Dimension of Corporate Social Responsibility is a Value Driver in the Oil and Gas Industry?

The oil and gas (O&G) industry suffers from a negative perception of poor sustainability. O&G companies are therefore engaged in several socially sustainable activities related to community development and environmental protection. This article determines whether the social, environmental, and economic dimensions of corporate social responsibility (CSR) are equally value‐additive to O&G companies. We measure the company‐specific level of CSR activities from the information provided in the annual financial reports of O&G companies and determine the effects of CSR dimensions on firm value. We find that CSR enhances firm value of O&G companies. While social activities such as employee well‐being and community development are key value‐drivers, environmental and economic sustainable activities have an insignificant impact on the market value of O&G companies. Copyright © 2018 ASAC. Published by John Wiley & Sons, Ltd     

Do Corporate Social Performance Targets in Executive Compensation Contribute to Corporate Social Performance?

To deal with potential conflicts between the triple-bottom-line expectations of investors and the performance of executives, firms can use incentives by integrating corporate social performance (CSP) targets into executive compensation. No evidence yet exists that CSP targets in executive compensation actually lead to an improvement of CSP results. Using a panel data set of 400 firms for the years 2008–2012 leading to 1846 firm-year observations, the relationships between CSP targets and CSP results and CSP improvements are analyzed. The results show that (a) the level of CSP has no effect on the use of CSP targets, (b) the use of CSP targets in general does not automatically lead to better CSP results, and (c) the use of quantitative, hard CSP targets is an effective way to improve CSP results, especially to lower CSP weaknesses.