Do Managers Do Good with Other Peoples' Money?

52 Pages Posted: 20 Nov 2011 Last revised: 11 Sep 2019

See all articles by Ing-Haw Cheng

Ing-Haw Cheng

Dartmouth College - Tuck School of Business

Harrison G. Hong

Columbia University, Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

Kelly Shue

Yale School of Management; National Bureau of Economic Research (NBER)

Date Written: September 10, 2019

Abstract

We show that firm social responsibility scores (ESG), generally attributed to pecuniary motives, are also driven by non-pecuniary considerations. We find that close passage of shareholder-rights proposals leads to lower ESG, consistent with the oft-discussed agency channel. We then show that dividend taxes play an under-appreciated role in driving ESG since these taxes have both agency and delegated-giving-as-tax-avoidance effects. The 2003 Dividend Tax Cut, which should have non-negative effects on ESG based on pecuniary considerations, is instead associated with a decline in ESG. Non-pecuniary considerations have implications for the cross-section of firm ESG scores.

Keywords: ESG, delegated giving, agency costs

JEL Classification: G30, G31, G35

Suggested Citation

Cheng, Ing-Haw and Hong, Harrison G. and Shue, Kelly, Do Managers Do Good with Other Peoples' Money? (September 10, 2019). AFA 2013 San Diego Meetings Paper; UCD & CalPERS Sustainability & Finance Symposium 2013; Fama-Miller Working Paper; Chicago Booth Research Paper No. 12-47. Available at SSRN: https://ssrn.com/abstract=1962120 or http://dx.doi.org/10.2139/ssrn.1962120

Ing-Haw Cheng

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Harrison G. Hong (Contact Author)

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kelly Shue

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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