Trust and corporate social responsibility: Evidence from CEO’s early experience

Dongmin Kong, Yin Piao, Wenzhe Zhang, Chenhao Liu and Ying Zhao

Economic Analysis and Policy, 2023, vol. 78, issue C, 585-596

Abstract: While previous literature has paid much attention on the effects of trust as an informal institution on economic growth and corporate behavior, it is unclear whether and how the trust affects the corporate social responsibility (CSR). In this study, we use CEOs’ early experiences on trust to assess the effect of CEO’s personal trust on CSR based on a difference-in-differences design. We find that CEOs with low trust levels are more inclined to be socially responsible. Mechanistically, CEOs are willing to take the initiative to fulfill their social responsibility due to risk aversion and concern for corporate development brought about by poor trust. After excluding competing explanations for the effects of early experience on human capital accumulation and health endowment, the results on the impact of trust on CSR remain robust. The inhibitory effect of trust on CSR is more pronounced in conditions of higher levels of external corporate governance, low financing constraints, and low analyst attention and among state-owned enterprises. The findings of this paper emphasize the important role of informal institutions in CSR performance.

Keywords: CSR; CEO’s personal trust; Culture and finance (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:78:y:2023:i:c:p:585-596

DOI: 10.1016/j.eap.2023.04.003

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