The Dark side of Independent Boards, the Case of Corporate Social Responsibility

35 Pages Posted: 15 Jun 2020 Last revised: 21 Sep 2020

See all articles by Fangzhou Lu

Fangzhou Lu

The University of Hong Kong - Department of Finance; Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: April 27, 2020

Abstract

Independent boards have been documented to have a positive effect on corporate governance, however, I show that independent boards improve shareholder value at the cost of sacrificing corporate social responsibility (CSR). Specifically, I find that stakeholders such as employees and consumers' interest have been compromised as a result of board myopia. This result is even stronger among firms in industries with intense product market competition, and among firms with more analysts followed. My result also suggests that negative corporate social behavior may not be fully priced by investors.

Keywords: Corporate Social Responsibility

JEL Classification: G23

Suggested Citation

Lu, Fangzhou, The Dark side of Independent Boards, the Case of Corporate Social Responsibility (April 27, 2020). Available at SSRN: https://ssrn.com/abstract=3586155 or http://dx.doi.org/10.2139/ssrn.3586155

Fangzhou Lu (Contact Author)

The University of Hong Kong - Department of Finance ( email )

Pokfulam
Hong Kong

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

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