Deviations from Expected Stakeholder Management, Firm Value, and Corporate Governance

Abstract

We propose that high‐quality corporate governance may mitigate agency costs related to value‐destroying investments in stakeholder management (SM). Using an unbalanced panel of 9,051 firm‐year observations for 1,631 firms, we find that deviations from expected stakeholder management (ESM) are increasing in chief executive officer (CEO) portfolio delta. We find, however, that deviations from ESM are negatively related to proxies for effective board monitoring. We also document that the effect of governance mechanisms varies by industry (consumer or industrial orientation) and SM dimension. The results indicate that corporations with good governance pursue shareholder value maximization while constraining unnecessary investment in stakeholders.

Does doing “good” always translate into doing “well”? An eco‐efficiency perspective

“…For the case of INDEP, the statistical significance is verified only for two cases (Consumer Staples and Communications), whereas when examining the duality variable (DUAL) although statistical significance is observed for the full sample data and for two sectors (Communications and Technology), but not for the other sectors. According to Benson, Davidson, Wang, and Worrell () and Harjoto et al (), higher board sizes combined with smaller shares/percentages of independent board members is associated with a higher engagement on CSR activities. This is somewhat counter to the ideas presented in Fama and Jensen (), which supports the view that the ability of firm to include more independent directors can act as a vital resource of specialized knowledge.…”

Corporate social responsibility and the wealth gains from dividend increases

“…Benson and Davidson (), Benson, Davidson, Wang, and Worrell (), and Coombs and Gilley () also estimate CSR engagement using the five dimensions accentuated by Kim et al. () .…”

The role of ethnic directors in corporate social responsibility: Does culture matter? The cultural trait theory perspectives

“…Therefore the ethnic minorities bring their firm specific skills, experience and social linkage resources to the company. These external resources they bring to the board enables the company to differentiate themselves from competitors and gain competitive edge over others by satisfying their varying interests and at the same time focusing on the long-term goal of the company (See, Agle et al, 1999;Jawahar and McLaughlin, 2001;Heslin and Ochoa, 2008;Benson et al, 2009;Chai, 2010).…”

“…The stakeholders' theory has been a useful framework to evaluate CSR through examining the impact of directors on CSR (Jawahar and McLaughlin, 2001;Benson, 2009). …”