Horizon to Sustainability: Uncover the Instrumental Nature of Corporate Social Responsibility

71 Pages Posted: 17 Mar 2021

See all articles by Xudong Fu

Xudong Fu

University of Louisville

Rui Shen

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics; Shenzhen Finance Institute

Tian Tang

University of Louisville

Xinyan Yan

University of Dayton

Date Written: February 23, 2021

Abstract

This paper finds that CEO incentive horizon, proxied by their pay duration, has a positive influence on the engagement in corporate social responsibility (CSR), especially when firms face a higher risk of reputation loss, need more stakeholder support, and maintain more effective corporate governance practices. CSR, when practiced by CEOs with longer-horizon incentives, benefits both stakeholders and shareholders in the long run. Further tests suggest that endogenous factors are unlikely to drive our conclusions and inferences. Taken together, our evidence suggests that the instrumental perspective on CSR prevails and long incentive horizon helps align stakeholders’ interests with shareholder value.

Keywords: Managerial Myopia, CEO Pay Duration, Corporate Social Responsibility (CSR), Stakeholders

JEL Classification: G30

Suggested Citation

Fu, Xudong and Shen, Rui and Tang, Tian and Yan, Xinyan, Horizon to Sustainability: Uncover the Instrumental Nature of Corporate Social Responsibility (February 23, 2021). Available at SSRN: https://ssrn.com/abstract=3791167 or http://dx.doi.org/10.2139/ssrn.3791167

Xudong Fu

University of Louisville ( email )

Louisville, KY 40292
United States

Rui Shen (Contact Author)

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics ( email )

2001 Longxiang Road, Longgang District
Shenzhen, 518172
China

Shenzhen Finance Institute ( email )

Tian Tang

University of Louisville ( email )

United States
502-852-4819 (Phone)

Xinyan Yan

University of Dayton ( email )

300 College Park
Dayton, OH 45469
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
112
Abstract Views
500
rank
335,818
PlumX Metrics