Socially responsible firms

• Main Authors: FERRELL, Allen, Hao LIANG, RENNEBOOG, Luc
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2016
• Subjects: corporate social responsibility; agency problems; value enhancement; corporate governance; Business Law, Public Responsibility, and Ethics; Corporate Finance
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/4962; https://ink.library.smu.edu.sg/context/lkcsb_research/article/5961/viewcontent/880271.pdf
• Institution: Singapore Management University

In the corporate finance tradition starting with Berle & Means (1923), corporations should generally be run so as to maximize shareholder value. The agency view of corporate social responsibility (CSR) considers CSR as an agency problem and a waste of corporate resources. Given our identification strategy by means of an IV approach, we find that well-governed firms who suffer less from agency concerns (less cash abundance, positive pay-for-performance, small control wedge, strong minority protection) engage more in CSR. We also find a positive relation between CSR and value and that CSR attenuates the negative relation between managerial entrenchment and value.