Corporate Social Responsibility as a Conflict between Shareholders

33 Pages Posted: 20 Mar 2005

See all articles by Amir Rubin

Amir Rubin

Simon Fraser University (SFU) - Beedie School of Business; Reichman University

Amir Barnea

HEC Montreal

Date Written: March 10, 2006


In recent years firms have greatly increased the amount of resources allocated to activities classified as Corporate Social Responsibility (CSR). While an increase in CSR expenditure may be consistent with firm value maximization if it is a response to changes in stakeholders' preferences, we argue that a firm's insiders (managers and large blockholders) may seek to over-invest in CSR for their private benefit to the extent that doing so improves their reputations as good global citizens. We test this hypothesis by investigating the relation between firms' CSR ratings and their ownership and capital structures. Employing a unique data set that categorizes the largest 3,000 U.S. corporations as either socially responsible or socially irresponsible, we find that on average, insiders' ownership and leverage are negatively related to the firm's social rating, while institutional ownership is uncorrelated with it. These results support our hypothesis that insiders induce firms to over-invest in CSR when they bear little of the cost of doing so.

Keywords: Corporate social responsibility, ownership structure, corporate governance

JEL Classification: G32, G34

Suggested Citation

Rubin, Amir and Barnea, Amir, Corporate Social Responsibility as a Conflict between Shareholders (March 10, 2006). EFA 2006 Zurich Meetings, Available at SSRN: or

Amir Rubin

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6

Reichman University ( email )

P.O. Box 167
Herzliya, 4610101

Amir Barnea (Contact Author)

HEC Montreal ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
514-340-7321 (Phone)
514-340-5632 (Fax)

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