Corporate Social Responsibility Versus Corporate Shareholder Responsibility: A Family Firm Perspective

56 Pages Posted: 30 May 2018

See all articles by Amal Abeysekera

Amal Abeysekera

University of Oklahoma - Michael F. Price College of Business

Chitru S. Fernando

University of Oklahoma - Michael F. Price College of Business

Date Written: May 2, 2018

Abstract

Recent literature suggests that some socially responsible corporate actions benefit shareholders while others do not. We study differences in policy toward corporate social responsibility (CSR) between family and non-family firms, using environmental performance as the proxy for CSR. We show that family firms are more responsible to shareholders than non-family firms in making environmental investments. When shareholder interests and societal interests coincide, i.e., when it comes to alleviating environmental concerns that have potential to harm society and elevate the firm’s risk exposure, family firms do at least as well as non-family firms in protecting shareholder interests. However, when shareholder and societal interests diverge, i.e., when it comes to making environmental investments that might benefit society but do not benefit shareholders, family firms protect shareholder interests by undertaking a significantly lower level of such investments than non-family firms. Our findings suggest that lack of diversification by controlling families creates strong incentives for them to act in the financial interest of all shareholders, which more than overcomes any noneconomic benefits families may derive from engaging in social causes that do not benefit non-controlling shareholders.

Keywords: family firms, corporate governance, corporate social responsibility, corporate shareholder responsibility, corporate environmental performance

JEL Classification: D64, G11, G32

Suggested Citation

Abeysekera, Amal and Fernando, Chitru S., Corporate Social Responsibility Versus Corporate Shareholder Responsibility: A Family Firm Perspective (May 2, 2018). Available at SSRN: https://ssrn.com/abstract=3178210 or http://dx.doi.org/10.2139/ssrn.3178210

Amal Abeysekera

University of Oklahoma - Michael F. Price College of Business ( email )

Adams Hall
307 West Brooks Street
Norman, OK 73019-4004
United States

Chitru S. Fernando (Contact Author)

University of Oklahoma - Michael F. Price College of Business ( email )

Adams Hall
307 West Brooks Street
Norman, OK 73019-4004
United States
405-325-2906 (Phone)
405-325-7688 (Fax)

HOME PAGE: http://faculty-staff.ou.edu/F/Chitru.Fernando-1/

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