CSR variability, managerial risk aversion, and hostile takeover threats

47 Pages Posted: 9 Oct 2022

See all articles by Tanakorn Likitapiwat

Tanakorn Likitapiwat

Chulalongkorn University

Sirimon Treepongkaruna

The University of Western Australia; Financial Research Network (FIRN)

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Date Written: September 8, 2022

Abstract

The quiet life hypothesis argues that, when managers are insulated from the discipline of the takeover market, they tend to be less ambitious, avoiding risky and complex investments that require more managerial time and efforts. In other words, they prefer to live a “quiet life”. Exploiting a distinctive measure of takeover vulnerability principally based on the staggered passage of state legislations, we investigate the quiet life hypothesis using corporate social performance. Our results show that more takeover exposure significantly raises CSR variability, consistent with the prediction of the quiet life hypothesis, where managers adopt riskier CSR strategies and investments when they are more exposed to takeover threats, resulting in higher CSR volatility. Specifically, an increase in takeover exposure by one standard deviation raises CSR variability by 5.23%-6.73%. Additional analysis corroborates the results, including propensity score matching, instrumental-variable analysis, Lewbel’s (2012) heteroscedastic identification, and entropy balancing.

Keywords: quiet life hypothesis, corporate social responsibility, the takeover market, mergers and acquisitions, corporate governance

JEL Classification: M14, G34

Suggested Citation

Likitapiwat, Tanakorn and Treepongkaruna, Sirimon and Jiraporn, Pornsit, CSR variability, managerial risk aversion, and hostile takeover threats (September 8, 2022). Available at SSRN: https://ssrn.com/abstract=4213645 or http://dx.doi.org/10.2139/ssrn.4213645

Tanakorn Likitapiwat

Chulalongkorn University ( email )

254 Phyathai Rd. Pathumwan
Bangkok, 10900
Thailand

Sirimon Treepongkaruna

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia
+61864887853 (Phone)
+61864881086 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

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