Business Law, Public Responsibility, and Ethics Commons^™

Corporate Social Responsibility And Bond Price At Issuances: Us Evidence, Hong Zhao, Wei Du, Hao Shen, Xinting Zhen

Economics & Finance Faculty Publications

Bondholders are arm's-length lenders with limited insider information. In this paper, we explore whether corporate social responsibility (CSR) activities could work as an information channel for bondholders to better understand the riskiness of bond-issuing firms. We find a significant negative relation between CSR scores and corporate bond yield spread, especially for firms which invest heavily in diversity and community relations, suggesting that CSR firms are less risky. The result is robust to different model specifications and endogeneity issues. In addition, the negative relation between the CSR score and bond yield spread is significant only if a firm has a strong …

Corporate Social Responsibility And Ceo Risk-Taking Incentives, Zhichuan Li

Business Publications

We examine how firms adjust CEO risk-taking incentives in response to risk environments associated with their corporate social responsibility (CSR) standing. We find strong evidence that as a firm's CSR status improves (declines), increasing (decreasing) its risk-taking capacity, the firm responds by adjusting compensation contracts to increase (decrease) CEO risk-taking incentives (Vega). One channel of the adjustment is through stock option grants. Further analyses indicate that the positive CSR-Vega association is stronger in firms with better corporate governance and in industries where riskiness is more important. Our evidence indicates that firms are not passive in response to changes in CSR …

The Role Of Mutual Funds In Corporate Social Responsibility, Zhichuan Li, Saurin Patel, Srikanth Ramani

Business Publications

This paper examines the role of mutual funds in corporate social responsibility (CSR). Using a fund-level, holdings-based CSR score, we find that CSR-friendly mutual funds improve firms’ CSR standings. This effect is more pronounced for firms with higher mutual fund ownership and stronger corporate governance. We further show that while CSR-friendly mutual funds have influence on almost all CSR categories, they focus on increasing CSR strengths rather than reducing CSR concerns. We also discover that CSR-friendly funds are more likely to vote in favor of CSR proposals, and that firms owned by CSR-friendly funds are more likely to link their …

Peer Effects Of Corporate Social Responsibility, Jie Cao, Hao Liang, Xintong Zhan

Research Collection Lee Kong Chian School Of Business

We investigate how firms react to their product-market peers' commitment to and adoption of corporate social responsibility (CSR) using a regression discontinuity design approach. Relying on the passage or failure of CSR proposals by a narrow margin of votes during shareholder meetings, we find the passage of a close-call CSR proposal and its implementation are followed by the adoption of similar CSR practices by peer firms. In addition, peers that have greater difficulty in catching up with the voting firm in CSR experience significantly lower stock returns around the passage, consistent with the notion that the spillover effect of the …

A Learning Curve Of The Market: Chasing Alpha Of Socially Responsible Firms, Zhichuan Li, Jun Wang, Dylan Minor, Chongyu Dang

Business Publications

This paper explores stock market reactions to corporate social performance. We find that a value-weighted portfolio based on the list of “100 Best CSR companies in the world”, published by Reputation Institute, yields statistically significant annual abnormal returns of 1.63% and 1.26%, by controlling for Carhart four factors and Fama-French five factors, respectively (2.39% and 1.84% respectively for an equal-weighted portfolio). Moreover, such abnormal returns decrease as time goes, especially after the inaugural publication of the CSR lists in 2013. The paper also indicates that companies with better social performance are more likely to have positive earnings surprises, and that …

Csr-Contingent Executive Compensation Contracts, Zhichuan Li

Business Publications

Firms have increasingly started tying their executives’ compensation to CSR-related objectives. In this paper, we attempt to understand why firms offer CSR-contingent compensation and the conditions under which such compensation improves corporate social performance. Using hand-collected data from proxy statements, we find that this emerging compensation practice varies significantly across industries and across different CSR categories. Further, well-governed firms are more likely to offer CSR-contingent compensation, and such compensation does lead to higher corporate social standing. Such firms are more likely to offer formula-based, Objective CSR-contingent compensation. However, our results suggest that non-formulaic, Subjective CSR-contingent compensation also helps improve companies’ …

Reading Between The Lines: Not All Csr Is Good Csr, David K. Ding, Christo Ferreira, Udomsak Wongchoti

Research Collection Lee Kong Chian School Of Business

Purpose: This paper aims to investigate whether corporate social responsibility (CSR), as evidenced in annual financial reports, is associated with a firm’s financial performance in New Zealand. Design/methodology/approach: A word count approach of several key CSR indicators found in the audited financial reports of NZX50 constituent firms is used. Several variables are constructed that measure the presence of CSR within the annual report such as sustainability, responsibility, social, environment, diversity, employee and community, and eight other variables within the annual report that measure the penetration of stakeholder engagement. Control variables and alternative measures of CSR are also included. Descriptive statistics …

Cross-Country Evidence On The Role Of Independent Media In Constraining Corporate Tax Aggressiveness, Kiridaran Kanagaretnam, Jimmy Lee, Chee Yeow Lim, Gerald J. Lobo

Research Collection School Of Accountancy

Using an international sample of firms from 32 countries, we study the relation between media independence and corporate tax aggressiveness. We measure media independence by the extent of private ownership and competition in the media industry. Using an indicator variable for tax aggressiveness when the firm’s corporate tax avoidance measure is within the top quartile of each country-industry combination, we find strong evidence that media independence is associated with a lower likelihood of tax aggressiveness, after controlling for other institutional determinants, including home-country tax system characteristics. We also find that the effect of media independence is more pronounced when the …

On The Foundations Of Corporate Social Responsibility, Hao Liang, Luc Renneboog

Research Collection Lee Kong Chian School Of Business

A firm’s corporate social responsibility (CSR) practice and its country’s legal origin are strongly correlated. This relation is valid for various CSR ratings coming from several large datasets that comprise more than 23,000 large companies from 114 countries. We find that CSR is more strongly and consistently related to legal origins than to “doing good by doing well”-factors, and most firm and country characteristics such as ownership concentration, political institutions, and degree of globalization. In particular, companies from common law countries have lower level of CSR than companies from civil law countries, and Scandinavian civil law firms assume highest level …

Socially Responsible Firms, Allen Ferrell, Hao Liang, Luc Renneboog

Research Collection Lee Kong Chian School Of Business

In the corporate finance tradition, starting with Berle and Means (1932), corporations should generally be run to maximize shareholder value. The agency view of corporate social responsibility (CSR) considers CSR an agency problem and a waste of corporate resources. Given our identification strategy by means of an instrumental variable approach, we find that well-governed firms that suffer less from agency concerns (less cash abundance, positive pay-for-performance, small control wedge, strong minority protection) engage more in CSR. We also find that a positive relation exists between CSR and value and that CSR attenuates the negative relation between managerial entrenchment and value.

Ceo Power, Corporate Social Responsibility, And Firm Value: A Test Of Agency Theory, Zhichuan Li

Business Publications

Purpose

The purpose of this paper is to explore whether firms with powerful chief executive officers (CEOs) tend to invest (more) in corporate social responsibility (CSR) activities as the over-investment hypothesis based on classical agency theory predicts.

Design/methodology/approach

This paper tests an alternative hypothesis that if CSR investment is indeed an agency cost like the over-investment hypothesis suggests, then those activities may destroy firm value.

Findings

Using CEO pay slice (Bebchuk et al., 2011), CEO tenure, and CEO duality to measure CEO power, the authors show that CEO power is negatively correlated with firm’s choice to engage in CSR …

Socially Responsible Firms, Allen Ferrell, Hao Liang, Luc Renneboog

Research Collection Lee Kong Chian School Of Business

In the corporate finance tradition starting with Berle & Means (1923), corporations should generally be run so as to maximize shareholder value. The agency view of corporate social responsibility (CSR) considers CSR as an agency problem and a waste of corporate resources. Given our identification strategy by means of an IV approach, we find that well-governed firms who suffer less from agency concerns (less cash abundance, positive pay-for-performance, small control wedge, strong minority protection) engage more in CSR. We also find a positive relation between CSR and value and that CSR attenuates the negative relation between managerial entrenchment and value.

Firm Litigation Risk And The Insurance Value Of Corporate Social Performance, Ping-Sheng Koh, Cuili Qian, Heli Wang

Research Collection Lee Kong Chian School Of Business

This paper advances the risk management perspective that superior social performance enhances firm value by serving as an ex ante valuable insurance mechanism. We posit that good social performance is more valuable as an insurance mechanism for firms with higher litigation risks. Moreover, value generation of corporate social performance (CSP) depends on whether a firm has gained pragmatic legitimacy (i.e., a firm's financial health) and moral legitimacy (i.e., whether or not a firm operates in a socially contested industry) among its stakeholders. We find that the value of CSP as insurance against litigation risk is practically significant, adding 2 to …

Corporate Social Responsibility For Solving The Housing Problem For The Poor In South Africa, Ayman Ahmed Ezzat Othman, Basheera Mia

Architectural Engineering

No abstract provided.