CEO Personal Hedging and Corporate Social Responsibility

Jongwon Park (), Sunyoung Kim () and Albert Tsang ()
Additional contact information
Jongwon Park: Monash University
Sunyoung Kim: Monash University
Albert Tsang: Hong Kong Polytechnic University

Journal of Business Ethics, 2023, vol. 182, issue 1, No 12, 199-221

Abstract: Abstract This study examines whether and how the presence of managerial hedging opportunities, which allows executives to reduce the sensitivity of their equity-based compensation to the firm’s stock price performance, affects firms’ corporate social responsibility (CSR) activities. We find a significant and negative relationship between the presence of managerial hedging opportunities and firms’ CSR performance. The effect of managerial hedging opportunities on CSR performance is more pronounced for CEOs with greater personal hedging needs. Additionally, the effect is weakened if firms limit corporate insiders from trading exchange-listed options. Overall, this study suggests that allowing managers to delink their equity-based compensation from firm stock price performance through hedging their personal portfolios can lead to unexpected consequences for firms’ CSR performance.

Keywords: CEO; Hedging; Corporate social responsibility; Equity incentives (search for similar items in EconPapers)
JEL-codes: G32 J30 M14 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s10551-021-05021-w

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