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Socially Responsible Firms
Renneboog,L.D.R. Liang,H. Ferrell,A.
Renneboog,L.D.R.
Liang,H.
Ferrell,A.
Abstract
In the corporate finance tradition starting with Berle & Means (1923), corporations should generally be run so as to maximize shareholder value. The agency view of corporate social responsibility (CSR) generally considers CSR as a managerial agency problem and a waste of corporate resources, since corporate insiders do good with other people’s money. We evaluate this agency view using large-scale datasets with global coverage (59 countries) on firm-level corporate engagement and compliance with respect to environmental, social, and governance issues. Using an instrumental variable approach, we document that CSR ratings are higher for companies with fewer agency problems (using standard proxies such as having lower levels of free cash flow and higher dividend payout and leverage ratios). Moreover, certain aspects of CSR (e.g., environmental, labor and social protection) are associated with increased executive pay-for-performance sensitivity and the maximization of shareholder value.
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Date
2014-07-30
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Finance
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2014_043.pdf
Adobe PDF, 472 KB
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Keywords
corporate social responsibility, agency problems, value enhancement, Corporate governance, G30 - General, G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill, M14 - Corporate Culture ; Diversity ; Social Responsibility
Citation
Renneboog, L D R, Liang, H & Ferrell, A 2014 'Socially Responsible Firms' CentER Discussion Paper, vol. 2014-043, Finance, Tilburg, pp. 1-43.