Socially Responsible Firms

69 Pages Posted: 12 Jul 2014 Last revised: 5 Aug 2016

Allen Ferrell

Harvard Law School; European Corporate Governance Institute (ECGI)

Hao Liang

Singapore Management University, Lee Kong Chian School of Business; Tilburg University, CentER

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2016

Abstract

In the corporate finance tradition, starting with Berle and Means (1932), corporations should generally be run to maximize shareholder value. The agency view of corporate social responsibility (CSR) considers CSR an agency problem and a waste of corporate resources. Given our identification strategy by means of an instrumental variable approach, we find that well-governed firms that suffer less from agency concerns (less cash abundance, positive pay-for-performance, small control wedge, strong minority protection) engage more in CSR. We also find that a positive relation exists between CSR and value and that CSR attenuates the negative relation between managerial entrenchment and value.

Keywords: Corporate social responsibility, agency costs, corporate governance

JEL Classification: G30, G31, G35, K22, L21, M14

Suggested Citation

Ferrell, Allen and Liang, Hao and Renneboog, Luc, Socially Responsible Firms (August 2016). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 432/2014. Available at SSRN: https://ssrn.com/abstract=2464561 or http://dx.doi.org/10.2139/ssrn.2464561

Allen Ferrell

Harvard Law School ( email )

Griswold 303 1525 Massachusetts Avenue
Cambridge, MA 02138
United States
(617) 495-8961 (Phone)
(617) 495-1110 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Hao Liang

Singapore Management University, Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

HOME PAGE: http://business.smu.edu.sg/faculty/profile/130396/LIANG-Hao

Tilburg University, CentER ( email )

Netherlands

Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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