Prosocial CEOs, Corporate Policies, and Firm Value
Review of Accounting Studies, Forthcoming
66 Pages Posted: 20 Oct 2020 Last revised: 11 Jan 2023
Date Written: January 2, 2023
This paper examines how chief executive officers’ (CEOs’) prosocial tendency influences corporate policies and firm value. We use individuals’ involvement with charitable organizations as a proxy for prosocial tendency. We find that, compared to firms with non-prosocial CEOs, firms with prosocial CEOs have lower executive subordinate turnover, implement more employee-friendly policies, experience higher customer satisfaction, and engage in more socially responsible activities. We also find that firms with prosocial CEOs have higher firm value and lower firm risk, partly due to the corporate policies adopted by prosocial CEOs. These results are corroborated when we compare changes in corporate policies and firm value around different types of CEO turnovers: a prosocial CEO replacing a non-prosocial CEO versus other types. Our results thus suggest that prosocial CEOs are more likely to make corporate decisions that benefit others and increase firm value.
Keywords: Prosocial tendency; Corporate policies; Employee turnover; Customer satisfaction; Corporate social responsibility; Firm value.
JEL Classification: D64, G40, G41, M14
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