Corporate Social Responsibility and Shareholder-Stakeholder Conflict: Evidence from a Quasi-Natural Experiment

41 Pages Posted: 10 Feb 2017 Last revised: 24 Sep 2018

See all articles by C.S. Agnes Cheng

C.S. Agnes Cheng

Hong Kong Polytechnic University - School of Accounting and Finance

Xiaohui Li

Hong Kong Polytechnic University - School of Accounting and Finance

Zeyu Sun

University of International Business and Economics (UIBE) - Business School

Jing Xie

Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: August 26, 2018

Abstract

We analyze the impact of the staggered adoption of state-level constituency statutes on corporate social responsibility (CSR), and the value implication of adjusting CSR engagement in response to the adoption of constituency statutes. The constituency statutes allow firms to consider interests of non-shareholder stakeholders and provide firms with discretion as to how stakeholder interests are considered. We find that firms respond to the adoption of constituency statutes by increasing CSR engagement. Besides, the positive impact of constituency statutes on CSR engagement is more pronounced for firms that distribute more cash to shareholders. In addition, we find that increased CSR engagement after the adoption of constituency statutes leads to increases in firm valuation, especially for firms that have a poorer information environment. This indicates that CSR engagement can mitigate the conflict between shareholders and stakeholders by promoting the interests of both parties. Taken together, our paper highlights the efficacy of stakeholder orientation in CSR and provides supporting evidence for the shareholder wealth maximization perspective of CSR.

Keywords: Corporate Social Responsibility, Constituency Statues, Shareholder-Stakeholder Conflict, Stakeholder Orientation

JEL Classification: M4, M14, G14, G38

Suggested Citation

Cheng, C.S. Agnes and Li, Xiaohui and Sun, Zeyu and Xie, Jing, Corporate Social Responsibility and Shareholder-Stakeholder Conflict: Evidence from a Quasi-Natural Experiment (August 26, 2018). Asian Finance Association (AsianFA) 2017 Conference. Available at SSRN: https://ssrn.com/abstract=2914724 or http://dx.doi.org/10.2139/ssrn.2914724

C.S. Agnes Cheng

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M715, Li Ka Shing Tower
Hung Hom, Kowloon, Kowloon
Hong Kong

Xiaohui Li

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Hung Hom
Kowloon
Hong Kong

Zeyu Sun

University of International Business and Economics (UIBE) - Business School ( email )

Beijing
China

Jing Xie (Contact Author)

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Hung Hom
Kowloon
Hong Kong

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