Managerial Incentives and Firm Risk Taking: The Mediating Role of Corporate Social Responsibility

Desheng Yin, Michael Wang, Yufan Sun, Haizhi Wang () and Xinting Zhen
Additional contact information
Desheng Yin: School of Economics and Management, East China Normal University, Shanghai 20062, China
Michael Wang: Department of Statistics, The Ohio State University, Columbus, OH 43201, USA
Yufan Sun: Stuart School of Business, Illinois Institute of Technology, Chicago, IL 60016, USA
Haizhi Wang: Stuart School of Business, Illinois Institute of Technology, Chicago, IL 60016, USA
Xinting Zhen: Department of Business Administration and Accounting, Saint Michael’s College, Burlington, VT 05446, USA

Risks, 2025, vol. 13, issue 3, 1-21

Abstract: In this study, we focus on managerial incentives provided by debt-like compensation and further investigate whether and to what extent such managerial incentives may affect CEOs’ decisions on risk management. Building on cumulative prospect theory and instrumental stakeholder theory, we propose that CEOs tend to have risk-reduction incentives if they are paid with debt in their own firms, and that firm engagement in corporate social responsibility (CSR) activities can mediate the relationship between debt-like compensation and firm risk taking. In addition, we posit that the mediated relationship between CEO debt-like compensation and firm risk taking is contingent, and we propose environmental dynamism and munificence as two such contingencies that moderate the mediated process. Using a large longitudinal dataset of nonfinancial U.S. firms, we document strong supportive evidence for these hypotheses.

Keywords: managerial incentive; corporate social responsibility; risk taking; cumulative prospect theory; instrumental stakeholder theory (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-9091/13/3/42/pdf (application/pdf)
https://www.mdpi.com/2227-9091/13/3/42/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:13:y:2025:i:3:p:42-:d:1599236

Access Statistics for this article

Risks is currently edited by Mr. Claude Zhang

More articles in Risks from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().