Corporate social responsibility and excess perks

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review

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Original languageEnglish
Article number101443
Journal / PublicationJournal of Empirical Finance
Volume74
Online published8 Nov 2023
Publication statusPublished - Dec 2023

Abstract

This study examines the effect of mandatory corporate social responsibility (CSR) on firm excess perks by exploiting China's 2008 mandate requiring firms to disclose CSR activities with a difference-in-differences design. We find that firms mandated to report CSR experience a decrease in excess perks subsequent to the mandate. Our empirical results also reveal that the decrease in excessive perks is more pronounced for firms with worse information environments, suggesting that mandatory CSR disclosure significantly reduces executive excessive perks and restricts managers’ unethical behavior by improving the quality of the information environment for investors. Also, we investigate an alternative channel from a managerial human capital dimension and find that reputed CEOs are more likely to regulate their behavior when mandated to disclose more non-financial information. Finally, we find that the mandatory CSR disclosure seems to improve firms’ sensitivity of pay-for-performance but show no impact on excess total cash compensation, suggesting that the improved performance-driven incentives are mainly driven by the reduced excessive perks. © 2023 Elsevier B.V.

Research Area(s)

  • Corporate social responsibility, Excess perks, Information disclosure

Citation Format(s)

Corporate social responsibility and excess perks. / Xi, Dan; Wu, Yuze; Wang, Xue et al.
In: Journal of Empirical Finance, Vol. 74, 101443, 12.2023.

Research output: Journal Publications and ReviewsRGC 21 - Publication in refereed journalpeer-review