Excess Insider Control and Corporate Social Responsibility: Evidence from Dual-Class Firms

• In Event: Public Interest

Abstract

Using a comprehensive hand-collected sample of U.S. firms which maintain two (or more) classes of common stock with differing voting rights, we investigate the impact of excess insider control on firms’ corporate social responsibility (CSR) performance. Ex ante, the effect of excess control in the hands of corporate insiders on CSR is uncertain. Reputation concerns, for instance, may motivate insiders to pursue higher levels of CSR, while preferences towards pecuniary or control-based self-gain may result in lower levels. In both univariate and multivariate analyses, we observe a negative association of excess insider control with several categories of CSR activities. In addition, in extended analyses, we find that accounting profitability moderates this relationship: higher profitability significantly lessens the negative association observed.

Authors

• Barry R Hettler, The College at Brockport, SUNY

• Arno Forst, University of Texas Rio Grande Valley

• James Cordeiro, The College at Brockport - SUNY