How do independent directors view corporate social responsibility (CSR) during a stressful time? Evidence from the financial crisis
We explore the effect of board independence on CSR investments during a stressful time, i.e. during the Great Recession. Our results show that independent directors exhibit an unfavorable view of CSR investments during the crisis. Stronger board independence leads to a significant reduction in CSR....
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th-mahidol.768842022-08-04T15:33:20Z How do independent directors view corporate social responsibility (CSR) during a stressful time? Evidence from the financial crisis Pandej Chintrakarn Pornsit Jiraporn Sirimon Treepongkaruna Sasin School of Management, Bangkok Penn State Great Valley The University of Western Australia Mahidol University Economics, Econometrics and Finance We explore the effect of board independence on CSR investments during a stressful time, i.e. during the Great Recession. Our results show that independent directors exhibit an unfavorable view of CSR investments during the crisis. Stronger board independence leads to a significant reduction in CSR. In particular, a rise in board independence by one standard deviation reduces CSR investments by about 8.22%. Further analysis shows that managers raised CSR investments during the crisis, consistent with the risk-mitigation view, where managers invest in CSR to reduce their risk exposure. However, managers appear to over-invest in CSR during the crisis as they are forced to cut back in the presence of a strong board, implying that part of the CSR investments during the crisis is motivated by managers’ own risk preference. Additional robustness checks corroborate the results, including fixed- and random-effects regressions, propensity score matching, and instrumental-variable analysis. Our study is the first to shed light on how independent directors view CSR during a stressful time. Finally, we show that CSR reduces firm risk substantially during the crisis, strongly confirming the risk-mitigation hypothesis. 2022-08-04T08:33:20Z 2022-08-04T08:33:20Z 2021-01-01 Article International Review of Economics and Finance. Vol.71, (2021), 143-160 10.1016/j.iref.2020.08.007 10590560 2-s2.0-85091059163 https://repository.li.mahidol.ac.th/handle/123456789/76884 Mahidol University SCOPUS https://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=85091059163&origin=inward |
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Economics, Econometrics and Finance Pandej Chintrakarn Pornsit Jiraporn Sirimon Treepongkaruna How do independent directors view corporate social responsibility (CSR) during a stressful time? Evidence from the financial crisis |
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We explore the effect of board independence on CSR investments during a stressful time, i.e. during the Great Recession. Our results show that independent directors exhibit an unfavorable view of CSR investments during the crisis. Stronger board independence leads to a significant reduction in CSR. In particular, a rise in board independence by one standard deviation reduces CSR investments by about 8.22%. Further analysis shows that managers raised CSR investments during the crisis, consistent with the risk-mitigation view, where managers invest in CSR to reduce their risk exposure. However, managers appear to over-invest in CSR during the crisis as they are forced to cut back in the presence of a strong board, implying that part of the CSR investments during the crisis is motivated by managers’ own risk preference. Additional robustness checks corroborate the results, including fixed- and random-effects regressions, propensity score matching, and instrumental-variable analysis. Our study is the first to shed light on how independent directors view CSR during a stressful time. Finally, we show that CSR reduces firm risk substantially during the crisis, strongly confirming the risk-mitigation hypothesis. |
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Sasin School of Management, Bangkok |
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Sasin School of Management, Bangkok Pandej Chintrakarn Pornsit Jiraporn Sirimon Treepongkaruna |
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Article |
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Pandej Chintrakarn Pornsit Jiraporn Sirimon Treepongkaruna |
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Pandej Chintrakarn |
title |
How do independent directors view corporate social responsibility (CSR) during a stressful time? Evidence from the financial crisis |
title_short |
How do independent directors view corporate social responsibility (CSR) during a stressful time? Evidence from the financial crisis |
title_full |
How do independent directors view corporate social responsibility (CSR) during a stressful time? Evidence from the financial crisis |
title_fullStr |
How do independent directors view corporate social responsibility (CSR) during a stressful time? Evidence from the financial crisis |
title_full_unstemmed |
How do independent directors view corporate social responsibility (CSR) during a stressful time? Evidence from the financial crisis |
title_sort |
how do independent directors view corporate social responsibility (csr) during a stressful time? evidence from the financial crisis |
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2022 |
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https://repository.li.mahidol.ac.th/handle/123456789/76884 |
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1763494852712988672 |