CEO risk-taking incentives and corporate social responsibility

Craig Dunbar, Li, Zhichuan (Frank) and Yaqi Shi

Journal of Corporate Finance, 2020, vol. 64, issue C

Abstract: We examine how firms adjust CEO risk-taking incentives in response to risk environments associated with their corporate social responsibility (CSR) standing. We find strong evidence that as a firm's CSR status improves (declines), increasing (decreasing) its risk-taking capacity, the firm responds by adjusting compensation contracts to increase (decrease) CEO risk-taking incentives (Vega). One channel of the adjustment is through stock option grants. Further analyses indicate that the positive CSR-Vega association is stronger in firms with better corporate governance and in industries where riskiness is more important. Our evidence indicates that firms are not passive in response to changes in CSR status and firm risk.

Keywords: Corporate social responsibility; Executive compensation; Managerial incentives; Vega; Social capital; Risk management (search for similar items in EconPapers)
JEL-codes: G32 G34 M14 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:64:y:2020:i:c:s0929119920301589

DOI: 10.1016/j.jcorpfin.2020.101714

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