More Stable, More Sustainable: Does TMT Stability Affect Sustainable Corporate Social Responsibility?

Abstract

ABSTRACT Building on the TMT behavioral integration of upper echelon theory, this study explores whether the stability of top management team (TMT) affects sustainable corporate social responsible activities (CSR). We also examine how the TMT stability-sustainable CSR relationship is moderated by CEO power. Analyzing a dataset of publicly listed firms in China for the period of 2009–2017, we provide evidence that a relatively stable TMT engages in sustainable CSR. This finding supports the argument that a stable TMT focuses on long-term sustainable development. Moreover, the positive effect of TMT stability on sustainable CSR is pronounced only for firms with weak CEO power. Further analysis shows that a positive association between TMT stability and sustainable CSR occurs for firms in CSR-sensitive industries and in an environment with low economic uncertainty. We then confirm that TMT stability positively affects sustainable CSR by improving team cohesion, which in turn contributes to higher firm performance and lower operational risk.