Top Management Teams’ Academic Experience and Firms’ Corporate Social Responsibility Voluntary Disclosure

Abstract

Corporate social responsibility (CSR) disclosure is becoming increasingly important for modern corporations. Focusing on voluntary CSR disclosure and drawing on upper echelons theory, we propose that voluntary CSR disclosure is the manifestation of managerial preferences (e.g., managers’ professional ethical values and standards). Specifically, we argue that top executives with an academic background tend to have higher professional and ethical standards than their non-academic counterparts. These standards lead them to act with self-restraint and to perceive CSR disclosure as an opportunity rather than a threat. Compared with non-academic executives, therefore, top executives with an academic background provide stakeholders with more CSR information. Based on a sample of publicly listed firms in China, we find a significant difference in voluntary CSR disclosure between firms led by academic executives and firms without academic top executives. This difference is smaller for firms that are state-owned, firms that are audited by large audit firms, and firms with greater analyst coverage. We contribute to the literature on CSR voluntary disclosure by providing an in-depth analysis of the effects of top management teams’ academic backgrounds.

Financial experts of top management teams and corporate social responsibility: evidence from China

“…Specifically, the financial experience by CSMAR refers to the experience gained by senior executives who have working experience in regulatory commissions, policy and commercial banks, insurance firms and investment banks, fund management firms, securities depository and clearing organizations, futures and trust firms, investment management firms, and stock exchanges (Shahab et al 2020). 9 Following Wiengarten et al (2017), Reimer et al (2018), Ma et al (2019), Shen et al (2020), andMa et al (2020), we define the TMT as comprising senior executives who directly engage in a company's investment and financing choices and corporate policies, including a company's CEO, executive chairperson, vice president, chief financial officer (CFO), financial controller, general manager, executive/deputy general manager, and vice manager. 10 To further examine the extent to which senior executives with financial experience influence CSR, we introduce Financial_ Ratio, which is calculated as the number of financial expert executives divided by the total number of TMT members as a robustness test.…”

“…In all OLS regressions, we cluster standard errors by firm and year. The 0.01, 0.05, and 0.1 significance levels are denoted by ***, **, and * (two-tailed), respectively experience, may shape individuals' belief systems and behaviours and may influence their actions when they become senior executives, such as CEOs (Gibbons and Waldman 2004;Ma et al 2019Ma et al , 2020. We, therefore, employ a categorical variable, Financial_CEO, and re-estimate Eq.…”

“…There is no denying that the CEO is one of the most important characters within a firm. Moreover, CFOs are responsible for managing firms' financial actions and investment affairs (Ma et al 2019(Ma et al , 2020. Their duties generally include tracking cash flow and financial planning, such as CSR investments.…”

“…Together, these findings demonstrate the essential role that CEOs/CFOs hold. However, the role of TMT cannot be underestimated, as the management literature has long pointed out the importance of the roles of all TMT members in day-to-day operations and in decision-making and business strategies (Ma et al 2020). UET (Hambrick and Mason 1984;Hambrick 2007) argues that it is the positive interaction among all TMT members that creates a magnified impact on firm policies.…”

“…Specifically, CSR, also known as corporate citizenship, is a corporate action taken on behalf of stakeholders (McWilliams and Siegel 2000). The interest in and scope of practicing CSR have expanded from a minority of academic researchers to a vast majority of business communities, investors, senior executives, and policymakers (Shahab et al 2018a;Ma et al 2020). 1 The effective use of CSR can enhance firm value, referred to as 'doing well by doing good' (Brown and Dacin 1997;Deng et al 2013;Boubakri et al 2016;Nguyen et al 2020).…”