Managerial entrenchment and corporate social responsibility engagement: the role of economic policy uncertainty

Abstract

The behavioral theory of corporate governance is employed to investigate the relationship between managerial entrenchment and corporate social responsibility (CSR) engagement. Effective corporate governance is argued to reduce managerial entrenchment, thereby increasing CSR engagement. The role of economic policy uncertainty (EPU) is investigated as a moderating variable in this relationship, such that high levels of EPU will increase the impact of entrenchment on CSR engagement. These arguments are supported using a panel of 386 US firms from 2011 to 2018 representing 3,088 firm-year observations in a variety of industries. In supplementary analysis, the CSR measure is disaggregated in order to provide further insight regarding these relationships as they pertain to the individual CSR dimensions under study. Findings inform research regarding the entrenchment-CSR link in particular environmental contexts. Practical implications include potential governance guidelines for boards of directors; stakeholder management given the policy environment; and the impact of government decisions as they affect policy uncertainty, firm actions, and CSR engagement.

Impacts of Firm Performance on Corporate Social Responsibility Practices: The Mediation Role of Corporate Governance in Ethiopia Corporate Business

“…Various businesses, scholars, and organizations focus on CSR in multiple aspects [38]. CSR is defined as the actions that appear to further some social good beyond the firm's interests and are required by law [39]. CSR is concerned with the relationship between companies and their stakeholders [40].…”

Corporate Social Responsibility Dan Earnings Management: Managerial Entrenchment Sebagai Variabel Moderasi

“…Kemudian literatur lain menyatakan bahwa dalam menghadapi mekanisme pemantauan yang tidak efektif dan ketersediaan peluang, manajer dapat mengikuti kepentingan mereka dengan mengorbankan investor. Mereka berusaha untuk memenuhi tujuan pribadi untuk mempertahankan pekerjaan mereka dan menghindari pengawasan pemangku kepentingan daripada mencapai tujuan perusahaan (Muriithi, 2021). Tata kelola yang lemah memberi ruang kepada manajer untuk memprioritaskan tujuan pribadi mereka di atas tujuan perusahaan (Bebchuk, dkk., 2009).…”

“…Di bawah skema seperti itu, CSR digunakan sebagai mekanisme entrenchment. Pernyataan tersebut diperkuat dengan pernyataan literatur lain dimana manajer yang tidak efisien kemudian memiliki motif khusus untuk berkomitmen pada perilaku yang bertanggung jawab secara sosial yang mendapatkan dukungan dari para pemangku kepentingan (Muriithi, 2021).…”

Are Corporate Social Responsibility Active Firms Less Involved in Earnings Management? Empirical Evidence From China

“…On the contrary, other scholars put forward the suggestion that managers might deliberately resort to CSR to conceal their opportunistic behaviours (the managerial opportunism hypothesis) (Choi et al, 2013;Kim et al, 2012). Advances in CSR could assist the managers to safeguard his or her job by evading scrutiny from stakeholder activists (Cespa & Cestone, 2007;Muriithi et al, 2021). Moreover, a settled partnership with stakeholders can be employed as an entrenchment mechanism by managers to fight off any hostile takeovers (Arthur et al, 2019;Muriithi et al, 2021).…”

“…Advances in CSR could assist the managers to safeguard his or her job by evading scrutiny from stakeholder activists (Cespa & Cestone, 2007;Muriithi et al, 2021). Moreover, a settled partnership with stakeholders can be employed as an entrenchment mechanism by managers to fight off any hostile takeovers (Arthur et al, 2019;Muriithi et al, 2021). Therefore, the managers who pursue their private rewards through distorting earnings information have incentives to be CSR active to protect their entrenchment (Choi et al, 2013).…”