Executive Incentives Matter for Corporate Social Responsibility under Earnings Pressure and Institutional Investors Supervision

Lili Ding, Zhongchao Zhao and Lei Wang
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Lili Ding: School of Economics, Ocean University of China, Qingdao 266100, China
Zhongchao Zhao: School of Economics, Ocean University of China, Qingdao 266100, China
Lei Wang: School of Economics, Ocean University of China, Qingdao 266100, China

Sustainability, 2020, vol. 12, issue 6, 1-22

Abstract: This paper theoretically explores the impact of the incentive preferences of executives (i.e., short-term incentives and long-term incentives) on corporate social responsibility (CSR) decisions (i.e., institutional CSR and technical CSR). Further, the paper presents the mechanism through which executives influence CSR activities by the pressures from financial analysts and institutional investors supervision. Using a large sample of China-listed firms over 2007–2017, we achieve some helpful empirical results. The executives with short-term incentives tend to implement technical CSR strategy, while those with long-term incentives tend to implement institutional CSR strategy. Executives with short-term incentives, compared with those with long-term incentives, show stronger inter-temporal tradeoffs behaviors in the earnings pressure context. Furthermore, dedicated institutional investors can effectively attenuate the hypocritical behaviors of executives, and the effectiveness of governance shows a positive relationship with investors’ horizon. Our findings enrich the understanding on the relationship between the executives and CSR decisions in the earnings pressure context and further helps to perfect the institutional design in China’s listed companies.

Keywords: Corporate Social Responsibility; Earnings Pressure; Executive Incentives; Institutional Investor; Emerging Market (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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