Corporate social responsibility engagement, corporate financial performance and CEO characteristics

Chao Bian, Christopher Gan, Zhaohua Li and Baiding Hu ()

International Journal of Business Governance and Ethics, 2016, vol. 11, issue 3, 243-265

Abstract: The current study examines the effect of corporate social responsibility (CSR) engagement on corporate financial performance (CFP). Prior studies document a positive CSR-CFP association without considering the moderating effects of chief executive officer (CEO) characteristics such as compensation incentives and tenure. Our results show evidence of a positive association between CSR and CFP only in the firms managed by short-tenured, high-cash paid CEOs and particularly during an industry's cooling-off period. The results imply that the incentives embedded in the current CEO pay are not effective and CEOs use CSR as a compensation management tool to increase their share-based pay. To encourage a CEO to implement CSR engagement, particularly during an industry's boom period, the board of directors should decrease common-share payments and increase the CEO's option payments. In addition, the proportion of cash compensation in the CEO's total compensation should not be reduced.

Keywords: corporate social responsibility; CSR; corporate financial performance; CFP; Chief Executive Officer; CEO characteristics; tenure; industry cycles; firm performance; compensation incentives; CEO tenure; compensation management; share-based pay; common-share payments; option payments; cash compensation. (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (17)

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