You Say Tough, I Say Hope: An Effect of CEO Regulatory Focus on Corporate Social Performance under Challenging Market Conditions

Seunghye Lee and Rami Jung ()
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Seunghye Lee: Sogang Business School, Sogang University, Seoul 04107, Republic of Korea
Rami Jung: College of Social Sciences, Hansung University, Seoul 02876, Republic of Korea

Sustainability, 2023, vol. 15, issue 6, 1-16

Abstract: This study explores the effect of CEO regulatory focus (i.e., promotion vs. prevention) on corporate social performance (CSP). Given that corporate social activities are an outcome-uncertain risky investment, we propose that CEOs with promotion focus (vs. prevention focus) would actively seek CSP, since promotion focus involves risk-taking propensity and prevention focus involves risk-avoiding behavior. We further propose that such a tendency should be more pronounced, especially when market conditions are uncertain. Using a panel sample of U.S. listed firms and conducting content analysis of CEO letters in annual reports, we found that only promotion-focused CEOs tend to promote CSP, and such a tendency is more salient in tough market conditions where firms face a lower level of munificence and a higher level of stakeholder expectation in the markets. We conclude that promotion-focused CEOs tend to seek hope even when situations are hopeless.

Keywords: CEO; regulatory focus; corporate social performance; market munificence; market concentration (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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