How do independent directors view corporate social responsibility (CSR) during a stressful time? Evidence from the financial crisis
| Autor: | Sirimon Treepongkaruna, Pornsit Jiraporn, Pandej Chintrakarn |
|---|---|
| Rok vydání: | 2021 |
| Předmět: |
Economics and Econometrics
Corporate governance media_common.quotation_subject chemical and pharmacologic phenomena Financial system Preference Independence Firm risk Propensity score matching Financial crisis Corporate social responsibility Business Robustness (economics) health care economics and organizations Finance media_common |
| Zdroj: | International Review of Economics & Finance. 71:143-160 |
| ISSN: | 1059-0560 |
| DOI: | 10.1016/j.iref.2020.08.007 |
| Popis: | We explore the effect of board independence on CSR investments during a stressful time, i.e. during the Great Recession. Our results show that independent directors exhibit an unfavorable view of CSR investments during the crisis. Stronger board independence leads to a significant reduction in CSR. In particular, a rise in board independence by one standard deviation reduces CSR investments by about 8.22%. Further analysis shows that managers raised CSR investments during the crisis, consistent with the risk-mitigation view, where managers invest in CSR to reduce their risk exposure. However, managers appear to over-invest in CSR during the crisis as they are forced to cut back in the presence of a strong board, implying that part of the CSR investments during the crisis is motivated by managers’ own risk preference. Additional robustness checks corroborate the results, including fixed- and random-effects regressions, propensity score matching, and instrumental-variable analysis. Our study is the first to shed light on how independent directors view CSR during a stressful time. Finally, we show that CSR reduces firm risk substantially during the crisis, strongly confirming the risk-mitigation hypothesis. |
| Databáze: | OpenAIRE |
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