A significant portion of the U.S. corporate expense budget is allocated to corporate social responsibility (CSR) spending. Given its importance, there has been a long-standing debate on its desirability from shareholders’ perspective. Several studies posit that CSR creates shareholder value through maximizing stakeholder value, a result known as “doing well by doing good” (Edmans, 2011; Ferrell, Liang, and Renneboog, 2016). In contrast to this performance view of CSR, the agency view of CSR claims it is merely a manifestation of managerial and shareholder interest misalignment (e.g., Cheng, Hong, and Shue, 2016). The empirical evidence on these two opposing views is mixed, leaving the important question—what is the fundamental motive of CSR activities?—largely unresolved.
Posted by Kose John (New York University), Jongsub Lee (University of Florida), and Ji Yeol Jimmy Oh (Hanyang University), on Wednesday, April 11, 2018
Editor's Note: Kose John is the Charles William Gerstenberg Professor of Banking and Finance at NYU Stern School of Business; Jongsub Lee is University Term Assistant Professor of Finance at University of Florida Warrington College of Business; and Ji Yeol Jimmy Oh is Assistant Professor of Finance at the Hanyang University Business School. This post is based on their recent paper. Related research from the Program on Corporate Governance includes Social Responsibility Resolutions by Scott Hirst (discussed on the Forum here).