Socially responsible firms

A. Ferrell, Hao Liang, Luc Renneboog

Research output: Contribution to journalArticleScientificpeer-review

Abstract

In the corporate finance tradition, starting with Berle and Means (1932), corporations should generally be run to maximize shareholder value. The agency view of corporate social responsibility (CSR) considers CSR an agency problem and a waste of corporate resources. Given our identification strategy by means of an instrumental variable approach, we find that well-governed firms that suffer less from agency concerns (less cash abundance, positive pay-for-performance, small control wedge, strong minority protection) engage more in CSR. We also find that a positive relation exists between CSR and value and that CSR attenuates the negative relation between managerial entrenchment and value.
Original languageEnglish
Pages (from-to)585-606
JournalJournal of Financial Economics
Volume122
Issue number3
DOIs
Publication statusPublished - Dec 2016

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Corporate Social Responsibility
Resources
Pay-for-performance
Shareholder value
Managerial entrenchment
Managerial values
Agency problems
Cash
Minorities
Corporate finance
Social values
Instrumental variables

Keywords

  • corporate social responsibility
  • agency costs
  • corporate governance

Cite this

Ferrell, A. ; Liang, Hao ; Renneboog, Luc. / Socially responsible firms. In: Journal of Financial Economics. 2016 ; Vol. 122, No. 3. pp. 585-606.
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Socially responsible firms. / Ferrell, A.; Liang, Hao; Renneboog, Luc.

In: Journal of Financial Economics, Vol. 122, No. 3, 12.2016, p. 585-606.

Research output: Contribution to journalArticleScientificpeer-review

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AU - Liang, Hao

AU - Renneboog, Luc

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AB - In the corporate finance tradition, starting with Berle and Means (1932), corporations should generally be run to maximize shareholder value. The agency view of corporate social responsibility (CSR) considers CSR an agency problem and a waste of corporate resources. Given our identification strategy by means of an instrumental variable approach, we find that well-governed firms that suffer less from agency concerns (less cash abundance, positive pay-for-performance, small control wedge, strong minority protection) engage more in CSR. We also find that a positive relation exists between CSR and value and that CSR attenuates the negative relation between managerial entrenchment and value.

KW - corporate social responsibility

KW - agency costs

KW - corporate governance

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JF - Journal of Financial Economics

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