Cross‐ownership and corporate social responsibility

Juan Carlos Bárcena‐Ruiz and Amagoia Sagasta
Authors registered in the RePEc Author Service: Juan Carlos Bárcena-Ruiz

Manchester School, 2021, vol. 89, issue 4, 367-384

Abstract: This paper introduces corporate social responsibility (CSR) into a quantity‐setting duopoly with cross‐participation at ownership level. One firm is fully owned by its shareholder, who also owns a minority participation in the rival firm (controlling shareholder). We analyze the shareholders’ strategic choice of whether to engage their firms in CSR or not. We find that high levels of cross‐ownership discourage the controlling shareholder from engaging his/her firm in CSR. When the level of cross‐ownership is low enough, in equilibrium both firms care about CSR, but the controlling shareholder makes his/her firm less concerned with CSR than the shareholder who runs the rival firm. We also find that, contrary to the usual result, when firms are concerned with social issues the controlling shareholder obtains a lower income than the other shareholder.

Date: 2021
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