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Article
Publication date: 22 March 2019

Shahbaz Sheikh

This study empirically aims to examine the relation between CEO power and firm engagement in corporate social responsibility (CSR). It undertakes an in-depth analysis of…

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Abstract

Purpose

This study empirically aims to examine the relation between CEO power and firm engagement in corporate social responsibility (CSR). It undertakes an in-depth analysis of how the structural, ownership and expert dimensions of CEO power affect individual dimensions of CSR.

Design/methodology/approach

This study uses ordinary least squares and industry fixed-effects regressions. It also uses instrumental variable-generalized method of moment regressions to test the robustness of empirical results.

Findings

Results indicate that CEO power is negatively related to CSR. However, the relation between CEO power and CSR is influenced by CSR strengths, as power is negatively related to CSR strengths and is not related to CSR concerns. Results also indicate that the structural and ownership dimensions of CEO power are negatively related to CSR, and the expert dimension has no significant effect on CSR. Moreover, results show that CEO power is not related to the product dimension of CSR performance.

Research limitations/implications

CEO power is measured using the structural, ownership and expert dimensions of power. However, CEOs also acquire power through social networks and connections outside the corporation which is not covered in this study.

Originality/value

This study uses comprehensive measures of CEO power and CSR. It is the first study that examines the effect of dimensions of CEO power on individual dimensions of CSR performance.

Details

Review of Accounting and Finance, vol. 18 no. 2
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 8 April 2019

Shahbaz Sheikh

The purpose of this paper is to investigate the effect of market competition on the relation between CEO inside debt and corporate risk-taking.

Abstract

Purpose

The purpose of this paper is to investigate the effect of market competition on the relation between CEO inside debt and corporate risk-taking.

Design/methodology/approach

Ordinary least squares regressions are used to estimate the relation between CEO inside debt and firm risk. Additionally, instrumental variable (IV-GMM) regressions are used to check the robustness of the results.

Findings

The results of this paper indicate that CEO inside debt is negatively associated with the measures of future risk. However, this negative association is influenced by market competition. Specifically, CEO inside debt results in lower levels of firm risk when market competition is high. When market competition is low, inside debt has no effect on firm risk. Additional results show that CEOs with large inside debt tend to decrease R&D investments and financial leverage and increase firm cash holdings and working capital only when market competition is high. Overall, these results suggest that market competition significantly influences the effect of CEO inside debt on corporate risk-taking by changing the strength of incentives from inside debt.

Practical implications

CEO inside debt could be used to provide incentives to CEOs to manage corporate risk-taking.

Social implications

The empirical results in this paper provide a practical tool to the boards of corporations to manage corporate risk-taking. The results suggest that boards can reduce excessive risk-taking by increasing the level of debt type compensation incentives. However, this strategy is effective only when market competition is high because in such markets inside debt provides the strongest incentives to reduce corporate risk. When competition is low, incentives from inside debt are ineffective in managing corporate risk-taking.

Originality/value

This is the first study that shows that the negative association between CEO inside debt and corporate risk-taking critically depends on the intensity of market competition.

Details

International Journal of Managerial Finance, vol. 15 no. 4
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 1 April 2020

Shahbaz Sheikh

The purpose of this paper is to empirically examine the relation between incentives from CEO inside debt (deferred compensation and pension benefits) and corporate social…

Abstract

Purpose

The purpose of this paper is to empirically examine the relation between incentives from CEO inside debt (deferred compensation and pension benefits) and corporate social responsibility (CSR).

Design/methodology/approach

Instrumental variable (IV-GMM) regressions are used to estimate the relation between CEO inside debt and CSR.

Findings

The results of this paper indicate that CEOs with large inside debt tend to invest more in CSR. Analysis of CSR strengths and concerns supports this finding and shows that CEO inside debt is significantly positively (negatively) associated with CSR strengths (concerns). Further tests indicate that CEO inside debt exerts a positive and significant effect on all five dimensions of social performance (diversity, community, product, employee relations and environment).

Research limitations/implications

The results of this study are based on US corporations. Future research should investigate if these results hold for firms in other countries in order to better our understanding of the relation between CEO inside debt and CSR.

Practical implications

CEOs use CSR as a risk management strategy to reduce corporate risk in order to protect the value of their inside debt.

Social implications

The results in this paper provide a practical tool to boards of corporations to increase investment in CSR. The results suggest that boards can encourage CEOs to invest in CSR by increasing incentives from inside debt.

Originality/value

This study contributes to the literature that examines the relation between inside debt and CSR by showing that CEO inside debt exerts a positive impact on CSR.

Details

International Journal of Managerial Finance, vol. 16 no. 4
Type: Research Article
ISSN: 1743-9132

Keywords

Article
Publication date: 21 February 2022

Lucia Gao, Shahbaz Sheikh and Hong Zhou

The purpose of this study is to empirically examine the relationship between executive compensation linked to corporate social responsibility (CSR) and firm risk. It also…

Abstract

Purpose

The purpose of this study is to empirically examine the relationship between executive compensation linked to corporate social responsibility (CSR) and firm risk. It also explores the moderating role of CSR-linked compensation on the relationship between risk-taking incentives provided in executive compensation and firm risk.

Design/methodology/approach

This study uses Ordinary Least Squares (OLS) and firm-fixed effects regressions to estimate the association between CSR-linked compensation and firm risk. Furthermore, it employs instrumental variable, propensity score matching and first-order difference approaches to address concerns about endogeneity and sample selection.

Findings

Benchmark results show that CSR-linked compensation reduces both total and idiosyncratic measures of risk. Further results indicate that CSR-linked compensation reduces firm risk only when risk is above the optimal level and has no significant effect when risk is below the optimal level. Additionally, tests show that CSR-linked compensation also mitigates the positive effect of Vega of executive compensation on risk and this mitigation effect is significant only when risk is above the optimal level.

Practical implications

The empirical results of this study show that boards can use CSR-linked compensation not only to induce higher social performance but also as a risk management tool to manage risk, especially when risk is above value increasing optimal levels. Furthermore, boards can use CSR-linked compensation to mitigate excessive risk-taking induced by option compensation.

Originality/value

This study contributes to the emerging literature on CSR-linked compensation and firm risk. To our knowledge, this is the first study that documents the direct risk-reducing effect of CSR-linked compensation and its mitigating effect on the relation between Vega of executive compensation and firm risk.

Details

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

Keywords

Article
Publication date: 14 December 2020

Shahbaz Sheikh

The purpose of this paper is to empirically investigate if and how firm performance in corporate social responsibility (CSR) is related to corporate payouts and how…

Abstract

Purpose

The purpose of this paper is to empirically investigate if and how firm performance in corporate social responsibility (CSR) is related to corporate payouts and how competition in product markets influences this relation.

Design/methodology/approach

Logit and Tobit regressions are used to estimate the relation between firm performance in CSR and corporate payouts.

Findings

The empirical results show that firm performance in CSR is positively related to the propensity and level of dividends, repurchases and total payouts (dividends plus repurchases). However, the positive relation between CSR performance and corporate payouts is significant only for firms that operate in low competition markets. In high competition markets, CSR performance does not seem to have any significant relation with corporate payouts.

Research limitations/implications

This study uses MSCI social ratings data to measure net scores on CSR. There is no systematic conceptual reason for measuring social performance using MSCI social ratings. Future research should use other measures of social performance (e.g. Dow Jones Sustainability Index, Accountability Ratings and Global Reporting Initiative to estimate the relation between CSR and corporate payouts).

Practical implications

CSR firms are more likely to choose higher payouts when they operate in low competition markets.

Originality/value

This study contributes to the stream of research that evaluates the payout choices of CSR firms and competition in product markets. To the author's knowledge, this is the first study that documents the impact of market competition on the relation between firm performance in CSR and corporate payouts.

Details

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

Keywords

Article
Publication date: 5 October 2018

Atreya Chakraborty, Lucia Gao and Shahbaz Sheikh

The purpose of this paper is to investigate if there is a differential effect of corporate governance mechanisms on firm risk in Canadian companies cross-listed on US…

Abstract

Purpose

The purpose of this paper is to investigate if there is a differential effect of corporate governance mechanisms on firm risk in Canadian companies cross-listed on US markets and Canadian companies not cross-listed (Canadian only companies).

Design/methodology/approach

Using a sample comprised of all Canadian companies included in the S&P/TSX Composite Index for the period 2009–2014, this study applies OLS and fixed effect regressions to investigate the effect of corporate governance mechanisms on firm risk. Interaction variables between governance mechanisms and the cross-listing status are used to examine if this effect is different for cross-listed firms.

Findings

Results indicate that the effect of board characteristics such as size, independence and proportion of female directors remains the same in both cross-listed and not cross-listed firms. CEO duality and insider equity ownership impact firm risk only in cross-listed companies, while institutional shareholdings, environmental, social and governance disclosure and family control affect firm risk in Canadian only firms. Overall, the empirical results indicate that some governance mechanisms impact firm risk only in firms that cross-list, while others are well-suited for Canadian only firms.

Practical implications

This study suggests that some of the differences between Canadian companies that cross-list and the Canadian companies that do not cross-list in US stock markets may change the impact of governance mechanisms on firm risk. Therefore, these findings have important implications for the design of governance mechanisms in Canadian firms. Since some of these differences are common to other economies, the conclusions can be extended to companies in other countries with similar governance structures.

Originality/value

Although previous studies have investigated the effect of governance mechanism on firm risk, this is the first paper that studies the differential effect for companies that cross-list in US markets. Specifically, differences in the ownership structure, firm control and in the regulatory and institutional environment, may explain this differential effect. Unlike most of the previous studies that focus on the effect of individual governance mechanisms, this study uses several mechanisms and their interactions at the same time.

Details

Management Decision, vol. 57 no. 10
Type: Research Article
ISSN: 0025-1747

Keywords

Book part
Publication date: 1 November 2008

Atreya Chakraborty and Shahbaz Sheikh

This study investigates the impact of corporate governance mechanisms on performance related turnover. Our results indicate that smaller boards and institutional block…

Abstract

This study investigates the impact of corporate governance mechanisms on performance related turnover. Our results indicate that smaller boards and institutional block holders are positively related to the likelihood of performance related turnover. CEOs that also hold the position of the chairman of the board or belong to a founding family face lower likelihood of turnover. CEO stock ownership is negatively related to turnover and CEOs who own 3 percent or more of their company stock face a significantly lower likelihood of performance related turnover. Moreover, protection from external control market has no effect either on the likelihood of turnover.

Details

Institutional Approach to Global Corporate Governance: Business Systems and Beyond
Type: Book
ISBN: 978-1-84855-320-0

Article
Publication date: 17 February 2012

Shahbaz Sheikh

The purpose of this paper is to examine if the structure and design of CEO compensation has any effect on firm innovation. It further investigates the effectiveness of…

3696

Abstract

Purpose

The purpose of this paper is to examine if the structure and design of CEO compensation has any effect on firm innovation. It further investigates the effectiveness of each component of portfolio of compensation incentives in encouraging innovation.

Design/methodology/approach

This study uses systems of simultaneous equations to model the interdependence between compensation incentives and measures of firm innovation.

Findings

Results indicate that the pay‐performance sensitivity of the CEO portfolio of compensation incentives is positively related to investment in R&D expenditures, number of patents and citations. Options in general are more effective than stocks. However, within the options portfolio, recently awarded and unvested options are more effective than previously awarded and vested options. Restricted stock is more effective than unrestricted stock.

Research limitations/implications

Measuring innovation output is difficult as innovation could take different forms, including business model innovation, which does not appear in the patent data.

Practical implications

Stock options encourage investment in value‐increasing innovations and should remain a significant part of managerial compensation. If the firm awards stock, it should only award restricted stock.

Originality/value

This study uses comprehensive measures of compensation incentives and firm innovation. It views incentives as a portfolio of stock and options and uses incentives in their entirety. It examines the effectiveness of each component of the portfolio in encouraging innovation. It measures innovation as investment into the innovation process (R&D expenditures) and the resulting success of that investment (patents and citations).

Details

Review of Accounting and Finance, vol. 11 no. 1
Type: Research Article
ISSN: 1475-7702

Keywords

Book part
Publication date: 1 November 2008

Abstract

Details

Institutional Approach to Global Corporate Governance: Business Systems and Beyond
Type: Book
ISBN: 978-1-84855-320-0

Article
Publication date: 21 June 2021

Aarif Mohd Sheikh

The term “social innovation” refers to interorganizational activity ostensibly designed to address environmental issues. Green intellectual capital (IC) has been…

Abstract

Purpose

The term “social innovation” refers to interorganizational activity ostensibly designed to address environmental issues. Green intellectual capital (IC) has been considered to be a vitally important mechanism for companies to move towards green production. By adopting the Intellectual capital-based view (ICV) as the underpinning theory, this study aims to investigate the green intellectual capital and social innovation tie-up.

Design/methodology/approach

A quantitative research approach was adopted in this study. The mail survey was used to collect data from managers of 509 manufacturing units operating in J&K, India. The study model was tested using structural equation modeling (SEM).

Findings

Based on the SEM results, the key factors that significantly influence social innovation were green human capital and green structural capital. The results also posited that green relational capital was not significantly related to social innovation.

Originality/value

As revealed by the existing literature, no similar work has been done yet. Therefore, this study's originality lies in its exploration of green intellectual capital (IC) and social innovation interplay in an environmentally sensitive sector, manufacturing. Besides, this study offers insights to academics and practitioners in the manufacturing sector, especially in emerging economies.

Details

Journal of Intellectual Capital, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1469-1930

Keywords

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