The sensitivity of corporate social performance to corporate financial performance: A “time-based†agency theory perspective

Bum-Jin Park and Ki-Hoon Lee
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Bum-Jin Park: Department of Business Administration, Global Business School, Soonchunhyang University, Asan-si, Republic of Korea
Ki-Hoon Lee: Griffith Business School, Griffith University, Brisbane, QLD, Australia

Australian Journal of Management, 2021, vol. 46, issue 2, 224-247

Abstract: This study focuses on micro-level phenomena and time issues that have been traditionally neglected in both corporate governance and corporate social responsibility research. Drawing on agency theory concerning time-based managerial incentives (i.e. short term and long term), we investigate which managerial incentives for compensation drive the sensitivity of corporate social performance ( CSP ) to corporate financial performance ( CFP ). Using data for publicly listed Korean firms, we found a significant and positive relationship between CSP and CFP , with this relationship strengthened in firms with high managerial ownership but insignificant in those with high earnings-based compensation. Furthermore, we found that the interaction effects of CSP and high earnings-based compensation on CFP become positive in firms with high managerial ownership, indicating that the sensitivity between CSP and CFP is driven by long-term managerial incentives. JEL Classification: M12, M14, G35

Keywords: Agency theory; corporate financial performance; corporate social performance; corporate social responsibility; managerial incentives (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:46:y:2021:i:2:p:224-247

DOI: 10.1177/0312896220917192

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