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Article
Publication date: 1 June 2012

Michel T.J. Rakotomavo

The paper aims to examine whether corporate investment in social responsibility takes away from expected dividends.

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Abstract

Purpose

The paper aims to examine whether corporate investment in social responsibility takes away from expected dividends.

Design/methodology/approach

The article builds two hypotheses that are tested empirically through the analysis of 17,670 US firm‐year observations covering the period 1991‐2007. The tests are conducted in both univariate and multivariate settings.

Findings

The evidence supports the hypothesis that mature firms tend to invest more in corporate social responsibility (CSR). Specifically, firms investing highly in CSR tend to be larger, more profitable, and with greater earned (rather than contributed) equity. The evidence also supports the hypothesis that CSR investment does not subtract from dividends. Instead, CSR effort and dividend tend to increase together. Thus, CSR investment tends to be effected by companies who can afford it, and it does not lower value by lowering investors' expected payout.

Practical implications

These results imply that spending resources on CSR does not lower the cash flows paid out to investors. When combined with the finding that CSR lowers the cost of equity, they also mean that CSR increases the value of a company's stock.

Originality/value

This is the first study that explicitly links CSR to the dividend flow.

Details

Social Responsibility Journal, vol. 8 no. 2
Type: Research Article
ISSN: 1747-1117

Keywords

Article
Publication date: 11 May 2015

Eri Nakamura

This paper aims to investigate the following two research questions: Do corporate social responsibility (CSR) investments enhance a firm’s economic performance? Does the…

Abstract

Purpose

This paper aims to investigate the following two research questions: Do corporate social responsibility (CSR) investments enhance a firm’s economic performance? Does the firm’s economic performance influence CSR investments? That is, the bidirectional relationship between CSR investments and economic performance.

Design/methodology/approach

This paper analyzes three types of CSR investments (environmental, labor-related and social investments) using a simultaneous equations model with a data set of 185 Japanese firms.

Findings

Environmental investments reduce economic performance, labor-related investments do not significantly affect economic performance and social investments increase economic performance. Moreover, strong economic performance decreases environmental investments but increases social investments. Labor-related investments are chosen considering economic performance in both the present and previous terms.

Practical implications

For managers, environmental and labor-related investments are not effective for improving economic performance. However, eradicating them completely might harm corporate reputation. In contrast, social investments have now become important. For policymakers, different approaches may be adopted to encourage firms to increase CSR investments. In some cases, policymakers can rely on firm initiatives instead of regulating or encouraging CSR activities.

Originality/value

First, the authors empirically examine the bidirectional relationship between CSR investments and economic performance. Second, they clarify the determinants of CSR by specifying the investment function of each type of CSR. Third, they consider three types of CSR investments, with interrelations among them allowed in the model, and determine how each type affects firm performance.

Details

Journal of Global Responsibility, vol. 6 no. 1
Type: Research Article
ISSN: 2041-2568

Keywords

Article
Publication date: 14 December 2020

Farah Zamir, Greg Shailer and Abubakr Saeed

Corporate investment efficiency ultimately influences economic development but is largely at the discretion of managers. Information asymmetries are problematic in…

Abstract

Purpose

Corporate investment efficiency ultimately influences economic development but is largely at the discretion of managers. Information asymmetries are problematic in emerging markets, but it is widely believed that corporate social responsibility (CSR) disclosures can reduce information asymmetries. This paper examines whether CSR disclosures influence corporate capital investment efficiency in emerging Asian markets.

Design/methodology/approach

Investment inefficiency is measured as the residuals from an investment model that is constructed by combining variables from prior studies to obtain a more detailed specification. A CSR disclosure index (CSRDI) is constructed from manually collected CSR disclosures for the largest corporations in each of the nine Asian emerging markets, as categorised by the MSCI Emerging Market Index, during 2015–2017. Underinvestments and overinvestments are regressed against the CSRDI, using a two-stage model to address the potential self-selection of CSR report issuers.

Findings

The results indicate that CSR disclosures reduce underinvestment for large firms but do not constrain overinvestment. These results are consistent with the propositions that, by increasing transparency or reducing information asymmetry, CSR disclosures can improve firm access to external finance needed to invest in profitable projects but cannot constrain entrenched managers who are not reliant on external finance.

Originality/value

This study extends the literature by analysing the impact of CSR disclosures on both underinvestments and overinvestments and by examining the CSR-investment efficiency across the nine emerging Asian markets. This enhances generalisability compared to single market studies. More generally, this study enhances the understanding of the role of non-financial disclosures in the Asian emerging markets, where corporate investment efficiency is important for economic development but where severe information asymmetry and agency conflicts between insiders and external investors are prevalent. Both the investment community and policymakers should benefit from enhanced understanding of factors that influence investment efficiency in those markets.

Details

International Journal of Managerial Finance, vol. 18 no. 1
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 16 September 2022

Muhammad Ilyas, Rehman Uddin Mian and Muhammad Tahir Suleman

This study aims to examine the impact of economic policy uncertainty (EPU) on firm investment in corporate social responsibility (CSR)’s environmental, social and…

Abstract

Purpose

This study aims to examine the impact of economic policy uncertainty (EPU) on firm investment in corporate social responsibility (CSR)’s environmental, social and governance (ESG) dimensions. Additionally, the study examines whether firm size moderates the EPU–CSR relationship.

Design/methodology/approach

The sample includes 2,017 US. firms from 2002 to 2018. Data on ESG scores are drawn from the Asset-4 database in Thomson Reuters to measure CSR investment. ordinary least square regression, including fixed effects at the year and industry level, is used as the main econometric specification. Moreover, the study employed the two-step system Generalized Method of Moments to address the endogeneity concerns.

Findings

The findings reveal that firms increase their CSR investment in response to high EPU. The results are consistent in all the three ESG/CSR dimensions: ESG. Moreover, the positive association between EPU and CSR is driven by firm size, indicating that large-sized firms have the resources and incentives to invest more in CSR. Our main findings remain consistent after addressing the endogeneity concerns and controlling for the effect of omitted variable biasness.

Originality/value

Using a unique sample of US firms, this study empirically contributes to the current literature on the association between EPU and CSR investment. Moreover, firm size plays a vital role in moderating this relationship.

Details

Management Decision, vol. 60 no. 12
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 5 April 2022

Ya-Hui Ling

This study examines the influence of context on Taiwanese senior managers' corporate social responsibility (CSR) decisions. The study seeks to identify the current…

Abstract

Purpose

This study examines the influence of context on Taiwanese senior managers' corporate social responsibility (CSR) decisions. The study seeks to identify the current profiles of managerial CSR perspectives and organizational CSR investments in Taiwan. In particular, whether a non-Friedman perspective is more prevalent than a Friedman perspective and whether community-related CSR is more prevalent than other CSR practices in Taiwan remain unclear. The study also seeks to identify the relationship between managers' CSR perspective profiles and organizational CSR investment profiles in Taiwan.

Design/methodology/approach

The sample was selected from the Taiwanese top companies list. Altogether, 150 valid responses from senior managers of 150 companies were returned.

Findings

The reported evidence shows that senior managers' Friedman/non-Friedman CSR perspective has a great influence in directing a firm's CSR decision in Taiwan. Managers holding the Friedman perspective are slightly more than those holding the non-Friedman CSR perspective, but both perspectives are popular. There is a tendency for firms to make either more or less investments in all CSR dimensions. A Friedman perspective tends to be associated with low CSR investments, and a non-Friedman perspective tends to be associated with high CSR investments.

Originality/value

A major contribution of this study is to offer a different perspective from the Western view regarding CSR implementation in a Chinese-dominant culture society. The study extends the upper echelon theory that managerial CSR perspectives can be a driver of a firm's CSR decision-making. The study also offers further evidence for the institutional theory that CSR is contextually dependent.

Details

Cross Cultural & Strategic Management, vol. 29 no. 3
Type: Research Article
ISSN: 2059-5794

Keywords

Article
Publication date: 5 July 2021

Hijroh Rokhayati, Mahfud Sholihin, Supriyadi Supriyadi and Ertambang Nahartyo

This paper aims to investigate the relationship between regulatory focus, performance measurement and corporate social responsibility (CSR) investment decisions.

Abstract

Purpose

This paper aims to investigate the relationship between regulatory focus, performance measurement and corporate social responsibility (CSR) investment decisions.

Design/methodology/approach

Using an experimental method with a 2 × 2 between-subjects factorial design involving 144 participants, the data were analyzed using t-test and contrast test. In the experiment, the authors assigned participants into prevention focus or promotion focus group and complementary performance measurement or substitute performance measurement condition.

Findings

The results show that CSR investment is more preferable for managers in prevention focus instead of those in promotion focus group. Additionally, CSR investment is more preferable for managers in complementary performance measurement condition compared to those in substitute performance measurement condition. This study also provides evidence that the greatest CSR investment is reached when managers are in both prevention focus group and complementary performance measurement conditions.

Practical implications

Companies need to activate the prevention focus for managers to motivate CSR investment. Additionally, companies need to use complementary performance measurements, which consist of CSR measurement and financial measurements.

Originality/value

CSR research is dominated by theories explaining the external models which trigger companies to perform CSR. Existing research related to the internal models is limited to psychological aspects that are not directly related to company performance. This study investigates the motivational attributes that have a direct and strong influence on managers behavior. This research shows that regulatory focus is better at predicting CSR investment and is more motivational for individuals to perform well at work.

Details

Social Responsibility Journal, vol. 18 no. 5
Type: Research Article
ISSN: 1747-1117

Keywords

Article
Publication date: 3 May 2013

Eri Nakamura

The purpose of this study is to use an empirical model to investigate the effects of eight types of shareholders on corporate social responsibility (CSR) investments in…

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Abstract

Purpose

The purpose of this study is to use an empirical model to investigate the effects of eight types of shareholders on corporate social responsibility (CSR) investments in terms of the monetary amount and ratio of each investment.

Design/methodology/approach

Cross‐sectional data obtained from Japanese companies in 2010 were used and three equations were estimated which reflect the effects of various shareholders on three types of CSR using ordinary least squares (OLS).

Findings

The study finds that the effects of shareholders on CSR investment are different depending on shareholder types. Investment funds and top management shareholders decrease each CSR investment, while the government, foreign companies and individuals, financial institutions, brokerages, and domestic companies and individuals increase CSR investments. Moreover, different shareholder types are interested in different CSR. Most shareholders are concerned with environmental policies, while foreign shareholders are also concerned with work‐life balance policies. Investment funds shareholders pay attention to all kinds of CSR. In addition, most outside shareholders are only concerned about individual CSR investments rather than a company's entire CSR resource allocation strategy.

Originality/value

This study empirically analyzes various types of shareholders, determining which hypothesis is valid and what type of shareholder increases or decreases CSR investment. This study considers shareholders' effects not only on each CSR action, but also in terms of an overall CSR strategy. This study provides guidance for managers that they should take into account in order to respond to each type of shareholder when they make decisions on CSR.

Details

Journal of Global Responsibility, vol. 4 no. 1
Type: Research Article
ISSN: 2041-2568

Keywords

Article
Publication date: 3 August 2015

Shou-Lin Yang, Yung-Ming Shiu and Tsung-Chi Liu

The purpose of this paper is to re-examine the statement of Peloza (2006) that enterprise corporate social responsibility (CSR) investment provides a protection efficacy…

Abstract

Purpose

The purpose of this paper is to re-examine the statement of Peloza (2006) that enterprise corporate social responsibility (CSR) investment provides a protection efficacy similar to insurance.

Design/methodology/approach

This study uses the event study method and data from the 2008-2010 China listed company social responsibility report and the Taiwan Economic Journal.

Findings

The authors find that the insurance-like effect of CSR investment also exists in China. Both short- and long-term CSR investments of Chinese companies provide this efficacy to corporate stock prices. The authors also find diminishing marginal insurance-like effects in China market.

Originality/value

The CSR investment of firms in China can reduce company stock-price loss when negative events occur. The authors therefore obtain a better understanding of the value of enterprise CSR investment.

Details

Chinese Management Studies, vol. 9 no. 3
Type: Research Article
ISSN: 1750-614X

Keywords

Book part
Publication date: 25 August 2022

Lei Dong, Y. Ken Wang and Kai Du

This study examines whether the source from which nonprofessional investors obtain corporate social responsibility (CSR) disclosure influences their investment-related…

Abstract

This study examines whether the source from which nonprofessional investors obtain corporate social responsibility (CSR) disclosure influences their investment-related judgments and decisions and whether that influence depends on the company's financial performance. In an experiment, we find an asymmetrical effect of information source that varies with financial performance. In particular, information source affects investors' management credibility judgments when the firm announces unfavorable earnings result but not when the announced result is favorable. The mediation analysis reveals that investors' management credibility judgments mediate the joint effect of information source and financial performance on investors' investment decisions. Our findings highlight that the effectiveness of CSR communication can be complicated and that investors are sensitive to other factors that exist in the communication setting, such as the context in which CSR is disclosed (contextual factor) and information source of CSR disclosures (attributional factor).

Details

Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-80382-802-2

Keywords

Article
Publication date: 22 October 2020

Yannick Thomas van Hierden, Timo Dietrich and Sharyn Rundle-Thiele

This study aims to demonstrate how banks can align their CSR investment to community needs and citizen preferences. A grounded theory inductive approach is applied to…

Abstract

Purpose

This study aims to demonstrate how banks can align their CSR investment to community needs and citizen preferences. A grounded theory inductive approach is applied to deliver a community-centred process that banks can apply to inform CSR investment decisions.

Design/methodology/approach

This study employed a sequential mixed-method research design to identify areas of need from the perspective of community leaders and members through depth interviews. Following thematic analysis, citizen preferences for eight priority areas were elicited using best-worst scaling (BWS).

Findings

Clear investment preferences emerged with citizens preferring six community investment causes, namely, (1) infrastructure, (2) crisis and prevention support, (3) community groups, (4) youth facilities and activities, (5) initiatives that support the local environment, and (6) physical activity promotion. The forming of community advisory committees emerged as one approach that banks could apply to ensure long-term citizen-centred CSR investment decisions.

Research limitations/implications

This study is limited to one community and one community bank and a small convenience, cross-sectional data sample.

Social implications

Community-oriented financial institutions should centre investment decisions on community need and citizen preferences ensuring investments made deliver the greatest societal benefit and community support for the banks is garnered.

Originality/value

This paper provides important contributions to improve the effectiveness of CSR initiatives, providing an inductive, methodological approach that financial institutions can follow to better align their CSR investment to community needs and preferences.

Details

International Journal of Bank Marketing, vol. 39 no. 4
Type: Research Article
ISSN: 0265-2323

Keywords

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