Do Managers Do Good with Other Peoples' Money?
52 Pages Posted: 20 Nov 2011 Last revised: 11 Sep 2019
Date Written: September 10, 2019
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: Suggested Citation