Abstract
This paper theoretically explores the impact of the incentive preferences of executives (i.e., short-term incentives and long-term incentives) on corporate social responsibility (CSR) decisions (i.e., institutional CSR and technical CSR). Further, the paper presents the mechanism through which executives influence CSR activities by the pressures from financial analysts and institutional investors supervision. Using a large sample of China-listed firms over 2007–2017, we achieve some helpful empirical results. The executives with short-term incentives tend to implement technical CSR strategy, while those with long-term incentives tend to implement institutional CSR strategy. Executives with short-term incentives, compared with those with long-term incentives, show stronger inter-temporal tradeoffs behaviors in the earnings pressure context. Furthermore, dedicated institutional investors can effectively attenuate the hypocritical behaviors of executives, and the effectiveness of governance shows a positive relationship with investors’ horizon. Our findings enrich the understanding on the relationship between the executives and CSR decisions in the earnings pressure context and further helps to perfect the institutional design in China’s listed companies.
Highlights
On 19 August 2019, Business Roundtable announced a new statement signed by 181 CEOs who commit to lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities, and shareholders. (Since 1978, Business Roundtable has periodically issued Principles of Corporate Governance)
Our findings show that executives with long-term incentives prefer to choose institutional corporate social responsibility (CSR) items to enhance the harmonious relationship with the community, while those with short-term incentives tend to choose technical CSR items
The average share is 4.066% (6.788%) in institutional ownership by dedicated institutional investors (DEDIINS) (TRANINS) in our sample, which includes 3.677% of the total shares held by LONDEDI (3.086% held by LONDEDI) and 2.119% held by SHODEDI (1.785% held by SHODEDI)
Summary
On 19 August 2019, Business Roundtable announced a new statement signed by 181 CEOs who commit to lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities, and shareholders. (Since 1978, Business Roundtable has periodically issued Principles of Corporate Governance). On 19 August 2019, Business Roundtable announced a new statement signed by 181 CEOs who commit to lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities, and shareholders. (Since 1978, Business Roundtable has periodically issued Principles of Corporate Governance). The new statement focuses on creating long-term value for all stakeholders and prioritizing corporate social responsibility (CSR), which will result in shared prosperity and sustainability for all society. In China, as an emerging market, the Shenzhen Stock Exchange initially issued guidelines on the social responsibility of listed companies in 2006. More and more listed firms have taken CSR programs to demonstrate their good corporate citizenship [2]. Many executives of China’s listed firms are severely lacking in their knowledge reserves related to the sustainable development strategy for society. A more integrative framework needs to be proposed to examine CSR issues and to investigate these issues in the context of emerging economies
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