Deciphering the Motives Behind Corporate Social Responsibility (CSR) Using Managerial Ownership: Evidence from Heteroskedastic Identification

19 Pages Posted: 11 Sep 2018

See all articles by Pradit Withisuphakorn

Pradit Withisuphakorn

National Institute of Development Administration (NIDA)

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Date Written: August 29, 2018

Abstract

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

Withisuphakorn, Pradit and Jiraporn, Pornsit, Deciphering the Motives Behind Corporate Social Responsibility (CSR) Using Managerial Ownership: Evidence from Heteroskedastic Identification (August 29, 2018). Available at SSRN: https://ssrn.com/abstract=3240798 or http://dx.doi.org/10.2139/ssrn.3240798

Pradit Withisuphakorn

National Institute of Development Administration (NIDA) ( email )

118 Seri Thai Road
Bangkok, 10240
Thailand

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

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