Abstract
In this study, we examine whether and to what extent affiliated bankers on board may affect firms’ corporate social performance. Using a propensity score-matched sample from 2002 to 2016, we find that board directors from affiliated banks exert significantly positive influence on firms’ corporate social performance. Furthermore, board of directors from affiliated banks are negatively associated with firm investments in corporate social responsibility (CSR) activities when firms experience financial distress. Finally, we find that the effect of affiliated bankers on board on firms’ CSR performance depends on the affiliated banks’ CSR orientation, as affiliated banker directors from banks with higher CSR orientation have a stronger influence on firms’ investments in CSR activities. The results suggest that improving firm’s CSR performance is consistent with the affiliated banks’ interests.
Highlights
The past few decades have witnessed a surge in firm engagements in activities related to corporate social responsibility (CSR)
We find that when default risk is high, the impact of affiliated banker directors on firms’ CSR investments is significantly reduced, which indicates that risk consideration is a driving force behind affiliated banker directors’ CSR decisions
This study examined how affiliated banker directors influence the firms’ CSR investment
Summary
The past few decades have witnessed a surge in firm engagements in activities related to corporate social responsibility (CSR). Existing literature has documented that engaging in CSR activities could reduce firms’ downside risks [21,22] In this sense, affiliated banker directors may exert their influence on firm CSR investments to reduce the risk exposures of the lending portfolios of their employing banks. Our work is the first empirical evidence on the presence of affiliated banker directors on boards and firms’ CSR investments. Prior literature shows that affiliated banker directors consider the interests of their employing banks when making firms’ decisions in major aspects including mergers and acquisitions [29], capital structures [17], investments [26], accounting conservatism [18], and CEO compensation [20].
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