Horizon to Sustainability: Ceo Incentive Duration and Corporate Social Responsibility

76 Pages Posted: 22 Jul 2024

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 South Florida - Department of Finance

Abstract

This paper finds that CEO incentive horizons, as measured by CEOs’ pay duration, are positively associated with their firms’ performance in corporate social responsibility (CSR), particularly for firms facing higher risks of reputation loss or requiring greater stakeholder support. Further tests suggest that longer pay duration incentivizes CEOs to invest in CSR activities that benefit both stakeholders and shareholders in the future. Moreover, we employ various identification strategies to show that endogenous factors are less likely to drive our conclusions or inferences. We conduct a series of tests to confirm the robustness of our findings. Overall, our evidence indicates the benefits of longer incentive horizons for helping firms align their stakeholders’ interests with those of stakeholders and broader goals of society and environment.

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

Suggested Citation

Fu, Xudong and Shen, Rui and Tang, Tian and Yan, Xinyan, Horizon to Sustainability: Ceo Incentive Duration and Corporate Social Responsibility. Available at SSRN: https://ssrn.com/abstract=4900624 or http://dx.doi.org/10.2139/ssrn.4900624

Xudong Fu

University of Louisville ( email )

Louisville, KY 40292
United States

Rui Shen

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 (Contact Author)

University of South Florida - Department of Finance ( email )

Tampa, FL 33620-5500
United States

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