Do Managers Do Good with Other People's Money?

42 Pages Posted: 14 Sep 2013 Last revised: 16 Sep 2013

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 2013

Abstract

We find support for two key predictions of an agency theory of unproductive corporate social responsibility. First, increasing managerial ownership decreases measures of firm goodness. We use the 2003 Dividend Tax Cut to increase after-tax insider ownership. Firms with moderate levels of insider ownership cut goodness by more than firms with low levels (where the tax cut has no effect) and high levels (where agency is less of an issue). Second, increasing monitoring reduces corporate goodness. A regression discontinuity design of close votes around the 50% cut-off finds that passage of shareholder governance proposals leads to slower growth in goodness.

Suggested Citation

Cheng, Ing-Haw and Hong, Harrison G. and Shue, Kelly, Do Managers Do Good with Other People's Money? (September 2013). NBER Working Paper No. w19432. Available at SSRN: https://ssrn.com/abstract=2325805

Ing-Haw Cheng (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Harrison G. Hong

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

Register to save articles to
your library

Register

Paper statistics

Downloads
27
Abstract Views
841
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information