When CEO Career Horizon Problems Matter for Corporate Social Responsibility: The Moderating Roles of Industry-Level Discretion and Blockholder Ownership

Abstract

This paper examines the influence of CEO career horizon problems on corporate social responsibility (CSR). We assume that as CEOs are getting older, they tend to disengage in CSR due to their shorter career horizons. We further argue that high levels of industry-level discretion (ILD) and blockholder ownership amplify the negative effects of CEO age on CSR. Using a panel sample of US-based firms over 2004-2009, we do not find the main effect of CEO age on CSR, but find support for the moderating effects, such that CEO age is negatively associated with CSR when there are high levels of ILD and blockholder ownership. Therefore, results suggest that CEO career horizon problems matter for CSR when (1) CEOs have sufficient discretion over the firm's strategic decisions and (2) outside blockholders put more pressure on CEOs to engage in financial earning management.

Big Egos Can Be Green: A Study of CEO Hubris and Environmental Innovation

“…Third, our study contributes to the literature on the drivers of CSR (Cheah et al, 2011;De Luque et al, 2008;Galbreath, 2010;Oh, Chang and Cheng, 2016;Waldman et al, 2006). We focus on one specific way through which CSR strategy is augmented (i.e.…”

“…Our study contributes to the UE research examining the influence of executives’ traits on corporate strategic decisions (Delgado‐García, La Fuente‐Sabaté and Manuel, ; Oh, Chang and Cheng, ; Piaskowska and Trojanowski, ) and on innovation in particular (Damanpour and Schneider, ; Kraiczy, Hack and Kellermanns, ; Musteen, Barker and Baeten, ). We extend this literature by examining the conditions under which CEO hubris supports green innovative strategies.…”

“…It is defined as a dummy variable taking the value 1 if the firm belongs to a highly regulated industry (SIC code 4000−4999), zero otherwise (Ferris, Houston and Javakhadze, ). IND_CAPEX (measured as the industry‐level capital expenditures divided by total sales; Oh, Chang, and Cheng, ) proxies for the degree of opportunities/barriers to innovation at the industry level.…”

“…Fabrizi, Mallin and Michelon (2014) show that both monetary and non-monetary CEO incentives explain CSR investments. Finally, Oh, Chang and Cheng (2016) report that CEO age negatively affects CSR performance only in the presence of large industry-level discretion and concentrated blockholder ownership.…”

“…Second, the diffusion of environmental innovation is initially slow and its returns cannot be appreciated in the short-term horizon (Kemp and Volpi, 2008). As part of the CSR strategy, investments in innovative green products/processes reflect the long-term strategic orientation of the firm and require a long period to pay off (Oh, Chang and Cheng, 2016). Furthermore, some studies cast doubts on how CSR affects financial performance (Chang, Oh and Messersmith, 2013).…”