Socially Responsible Firms

L.D.R. Renneboog, H. Liang, A. Ferrell

Research output: Working paperDiscussion paperOther research output

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Abstract

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) generally considers CSR as a managerial agency problem and a waste of corporate resources, since corporate insiders do good with other people’s money. We evaluate this agency view using large-scale datasets with global coverage (59 countries) on firm-level corporate engagement and compliance with respect to environmental, social, and governance issues. Using an instrumental variable approach, we document that CSR ratings are higher for companies with fewer agency problems (using standard proxies such as having lower levels of free cash flow and higher dividend payout and leverage ratios). Moreover, certain aspects of CSR (e.g., environmental, labor and social protection) are associated with increased executive pay-for-performance sensitivity and the maximization of shareholder value.
Original languageEnglish
Place of PublicationTilburg
PublisherTILEC
Pages1-43
Volume2014-029
Publication statusPublished - 30 Jul 2014

Publication series

NameTILEC Discussion Paper
Volume2014-029

Fingerprint

Corporate Social Responsibility
Shareholder value
Agency problems
Dividend payout
Resources
Governance
Rating
Pay-for-performance
Social protection
Corporate finance
Insider
Free cash flow
Labor
Leverage ratio
Instrumental variables
Executive pay

Keywords

  • corporate social responsibility
  • agency problems
  • value enhancement
  • Corporate governance

Cite this

Renneboog, L. D. R., Liang, H., & Ferrell, A. (2014). Socially Responsible Firms. (pp. 1-43). (TILEC Discussion Paper; Vol. 2014-029). Tilburg: TILEC.
Renneboog, L.D.R. ; Liang, H. ; Ferrell, A. / Socially Responsible Firms. Tilburg : TILEC, 2014. pp. 1-43 (TILEC Discussion Paper).
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Renneboog, LDR, Liang, H & Ferrell, A 2014 'Socially Responsible Firms' TILEC Discussion Paper, vol. 2014-029, TILEC, Tilburg, pp. 1-43.

Socially Responsible Firms. / Renneboog, L.D.R.; Liang, H.; Ferrell, A.

Tilburg : TILEC, 2014. p. 1-43 (TILEC Discussion Paper; Vol. 2014-029).

Research output: Working paperDiscussion paperOther research output

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Renneboog LDR, Liang H, Ferrell A. Socially Responsible Firms. Tilburg: TILEC. 2014 Jul 30, p. 1-43. (TILEC Discussion Paper).