Can Socially Responsible Firms Survive Competition? An Analysis of Corporate Employee Matching Grant Schemes*

Gong, Ning; Grundy, Bruce D.

doi:10.1093/rof/rfx025

Cited by 23 publications

(11 citation statements)

References 67 publications

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“…The research on the relationship between CSR and CFP is saturated (e.g., References [13,14]). Many studies found that CSR can improve CFP through a variety of channels, such as labor reputation [15], customer awareness [16], labor productivity [17], and improved transparency [18]. Some studies found a negative relationship (e.g., Reference [19]), citing an agency problem or shareholder-stakeholder conflicts.…”

Section: Literature Review and Discussionmentioning

confidence: 99%

CSR-Contingent Executive Compensation Incentive and Earnings Management

Thibodeau

2019

Sustainability

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This paper empirically studies the connection between earnings management and corporate social performance, conditional on the existence of CSR-contingent executive compensation contracts, an emerging practice to link executive compensation to corporate social performance. We find that executives are more likely to manipulate earnings to achieve their personal compensation goals when CSR rating is low, as well as their CSR-contingent compensation. Because of public pressure on their excessive total compensation, corporate executives see no need to manipulate earnings to increase compensation when their CSR-contingent compensation is already high. Our results suggest that earnings management and CSR-contingent compensation are substitute tools to serve the interests of executives, which is an agency problem that was never previously studied. Additionally, we explore how managerial characteristics affect earnings management, driven by the incentive effects of CSR-linked compensation.

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Section: Literature Review and Discussionmentioning

confidence: 99%

CSR-Contingent Executive Compensation Incentive and Earnings Management

Thibodeau

2019

Sustainability

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“…Looking at other performance metrics, McGuire et al [3] found significant correlations between social responsibility and return on assets (ROA), Debt/Assets, Beta and standard deviation of total returns. More recent studies focus on different aspects of CSR and their impacts on firm outcomes, including labor reputation [18], customer awareness [19], labor productivity [20] and improved transparency [21]. In this study, we attempt to use numerous firm and executive characteristics to determine if consistent results can be obtained.…”

Section: Firm Performance and Corporate Social Responsibilitymentioning

confidence: 97%

The Effect of Corporate Visibility on Corporate Social Responsibility

Morris

Young

2019

Sustainability

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Outside of direct ownership, the general public may feel it is an implicit stakeholder of a firm. As the public becomes more vested in a firm’s actions, the firm may be more likely to engage in Corporate Social Responsibility (CSR) activities. We proxy for the public’s stake in a firm with public visibility. Based on 3400 unique newspaper publications from 1994–2008, we measure visibility for the S&P 500 firms with the frequency of print articles per year concerning the firm. We find that visibility has a signficant, positive relationship with the CSR rating. Evidence also suggests this relationship may be causal and working in one direction, from visibility to CSR. While the existing literature provides other factors that influence CSR, visibility proves to have the most significant impact when tested alongside those other factors. Visibility also has a mediating effect on the relationship between CSR rating and firm size. CSR rating and firm size relate negatively for the lowest visibility firms and positively for the highest. This paper provides strong evidence that visibility is an important factor to consider for studies on corporate social performance.

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“…In each case, the motivation for reporting would be similar between public and private firms, except when considering communication with dispersed investors. Figure References: b superior workforce (Surroca, Tribo, and Waddock, 2010;Bhattacharya et al, 2011), c increases intangible assets (Sharma and Vredenburg, 1998;Surroca et al, 2010;Porter and Kramer, 2011), d operating efficiency gains (Spicer and Lambdin, 2012), e enhanced attractiveness of the firm's shares (Brown-Liburd, Cohen, and Zamora, 2018;Elliott, Grant, and Rennekamp, 2017), f ability to attract the socially responsible investors [funds managed over $550bn in 2012 (Glassman, 2012) and Miralles-Quir os and Miralles-Quir os (2017) note that socially responsible investment has "grown enormously and as expanded globally in recent years. "], g increased institutional ownership and analyst following, lower cost of equity capital (Dhaliwal, Li, Tsang, and Yang, 2011;El Ghoul, Guedhami, Kwok, and Mishra, 2011;Dhaliwal, Radhakrishnan, Tsang, and Yang, 2012), h ability to signal expected future performance (Lys, Naughton, and Wang, 2015), i higher valuation judgments by investors for firms publishing CSR reports (Elliott, Jackson, Peecher, and White, 2014;Cheng, Green, and Ko, 2015), j favorable borrowing terms for CSR-active firms (Roberts, 1992;Goss and Roberts, 2011;Guiral, 2012), k enhanced ability to recruit employees (Chambers et al, 1998;Knight, 2006), l superior customer relations, which can result in increased sales (Klein and Dawar, 2004;Luo and Bhattacharya, 2006;Lev et al, 2010;Kim, 2017) and m improved community relations (Spicer and Lambdin, 2012) SAMPJ 11,1…”

Section: Improved Community Relations Mmentioning

confidence: 99%

Information asymmetry in CSR reporting: publicly-traded versus privately-held firms

Hickman

2020

SAMPJ

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Purpose This paper aims to investigate the motivations behind the publication of corporate social responsibility (CSR) reports, and particularly the effect of information asymmetry between firms and their owners. Design/methodology/approach A natural experiment contrasting the CSR reporting of private vs public firms is used to test whether the degree of information asymmetry is a significant factor in the decision to publish CSR reports. Using a hand-collected sample of the 239 largest US private companies matched with publicly-traded firms, the effect of these inherently different information environments on CSR reporting is tested through logistic regression. Factors suggested by stakeholder and legitimacy theories are tested for their differential impact on private vs public firms’ decisions to publish a CSR report. Findings Results indicate that private firms are less likely to publish a CSR report than similar public firms. Public firms also follow Global Reporting Initiative guidelines more frequently, consistent with signaling report quality to dispersed investors. A subsample of private companies facing greater information asymmetry is found to be similar to public firms in their reporting behavior, reinforcing the link between information asymmetry and CSR disclosure. Further analysis suggests that non-owner stakeholders play an important role in private companies’ CSR reporting decisions. Practical implications In addition to accounting and governance scholars, the findings should interest private firm managers preparing for an initial public offering (IPO), as the evidence suggests that CSR reporting is used to communicate information to dispersed investors. The insight into reporting motivations should be useful to accountants engaged in CSR consultation and assurance. Social implications With the growing attention paid to the CSR performance of firms, demonstrated by the growth in socially responsible investing, the study provides evidence that effective communication of CSR information to investors may play a key role in CSR-engaged firms’ disclosure strategies. Originality/value To the best of the author’s knowledge, this study is the first to analyze the CSR reporting decisions of a large sample of publicly-traded and privately-held firms. The results add to our understanding of what motivates firms to publish CSR reports, highlighting the importance of information asymmetry between the firm and its owners.

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Can Socially Responsible Firms Survive Competition? An Analysis of Corporate Employee Matching Grant Schemes*

Cited by 23 publications

References 67 publications

CSR-Contingent Executive Compensation Incentive and Earnings Management

CSR-Contingent Executive Compensation Incentive and Earnings Management

The Effect of Corporate Visibility on Corporate Social Responsibility

Information asymmetry in CSR reporting: publicly-traded versus privately-held firms

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