Deciphering the Motives Behind Corporate Social Responsibility (CSR) Using Managerial Ownership: Evidence from Heteroskedastic Identification
19 Pages Posted: 11 Sep 2018
Date Written: August 29, 2018
Motivated by agency theory, we investigate the effect of managerial ownership on CSR engagement. Exploiting Lewbel’s (2012) heteroskedastic identification and using a large U.S. sample of over 14,000 observations across 18 years, we find that higher managerial ownership diminishes CSR engagement significantly. As managers own a larger share of equity, they bear greater costs of CSR, leading to a reduction in CSR engagement. Further analysis, however, shows that not all CSR activities are motivated by agency problems. In particular, the CSR activities related to human rights and products appear to promote shareholders’ wealth. The results of this study are important as they show that there can be different motives behind different CSR activities. We contribute to the literature by shedding light on the motives behind CSR investments using a novel identification strategy.
Keywords: corporate social responsibility, CSR, agency theory, agency problems, managerial ownership
JEL Classification: M14, G32, G34
Suggested Citation: Suggested Citation