Abstract
This study uncovers a new finding on the impact of CEO tenure on corporate social and environmental performance (CS&EP) in coastal and non-coastal areas of China using fixed-effect panel data regression models. The Two-Stage Least Squares instrumental panel regression is used to validate the veracity of the empirical results. To this end, we extract data from all non-financial Chinese listed firms for the period of 2009 to 2015. By applying the multivariant framework, the findings of the study exhibit a negative and significant effect of CEO tenure on CS&EP. Moreover, this study shows that firms with head offices in coastal areas of China tend to weaken the negative impact of CEO tenure on CS&EP, indicating that CS&EP is more focused in coastal areas of China than non-coastal ones. The findings suggest that the increase in CEOs’ CS&EP in the early years of their service tenure tends to increase their compensation packages. This study is useful for policymakers to link CS&EP with firm economic practices to attain sustainable development objectives.
Highlights
The extant literature signifies that social activities are performed for investment and signaling purposes (Su et al, 2016)
This study shows that firms with head offices in coastal areas of China tend to weaken the negative impact of CEO tenure on corporate social and environmental performance (CS&EP), indicating that CS&EP is more focused in coastal areas of China than noncoastal ones
We can see that the parameter of CEO TNUR is negative but significant at the 1% level (0.07), suggesting that CEO tenure has a negative and significant impact on the firm’s CS&EP
Summary
The extant literature signifies that social activities are performed for investment and signaling purposes (Su et al, 2016). We hypothesize that the inverse impact of CEO tenure on CS&EP is weaker in the coastal areas of China Another interesting question remains to be answered: Does the CEO’s early service tenure engagement in social and environmental activities increase or decrease their compensation package in the Chinese context? Focusing more on securing the stakeholders’ interests makes them more inclined to support the firm’s operations, which results in an increase in the shareholders’ wealth In this line of research, since in the initial service tenure of a CEO the gradual increase in social and environmental investment is associated with the betterment of the firm’s shareholders’ wealth, we anticipate that the CEO would be rewarded for their commitment to enhancing CS&EP, which would reduce their career-related concerns. The rest of the control variables in model 1 are used in the evaluation process
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