Corporate Social Responsibility, Corporate Governance, and Managerial Risk-Taking

80 Pages Posted: 18 May 2014

See all articles by Mohamed Ayadi

Mohamed Ayadi

Brock University - Department of Finance, Operations and Information Systems (FOIS)

Martin I. Kusy

Brock University, Goodman School of Business

Minyoung Pyo

Brock University

Samir Trabelsi

Brock University - Accounting

Date Written: May 15, 2014

Abstract

This paper investigates the association between corporate social responsibility (CSR) and managerial risk-taking, as well as the differences in governance structure that affect this association. Using a sample of US public firms, we find that firms with strong CSR records engage in higher risk-taking. Furthermore, we find that accounting for differences in governance structure substantially accentuates this relationship. Prior literature establishes that high managerial risk-tolerance is necessary for the undertaking of risky yet profitable investment decisions. Thus, these findings suggest that CSR, rather than being a waste of scarce corporate resources, is instead an important aspect of shareholder value creation. They contribute to the debate on CSR by documenting that corporate risk-taking is one mechanism among others through which CSR maps into higher firm value.

Keywords: Corporate social responsibility, corporate governance, managerial risk taking, panel regression

JEL Classification: G30; G21; C33

Suggested Citation

Ayadi, Mohamed and Kusy, Martin I. and Pyo, Minyoung and Trabelsi, Samir, Corporate Social Responsibility, Corporate Governance, and Managerial Risk-Taking (May 15, 2014). Available at SSRN: https://ssrn.com/abstract=2438177 or http://dx.doi.org/10.2139/ssrn.2438177

Mohamed Ayadi

Brock University - Department of Finance, Operations and Information Systems (FOIS) ( email )

Ontario, L2S 3A1
Canada

Martin I. Kusy

Brock University, Goodman School of Business ( email )

500 Glenridge Avenue
International Business and Strategy
St. Catherine's, Ontario L2S 3A1
Canada

Minyoung Pyo

Brock University ( email )

500 Glenridge Avenue
St. Catherines, Ontario L2S 3A1
Canada

Samir Trabelsi (Contact Author)

Brock University - Accounting ( email )

St. Catharines, Ontario L2S 3A1
Canada

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