Does CEO tolerance to risk affect a firm’s long-run sustainability? Using CEO insider debt holding, we show that CEO’s risk-aversion encourages immoral yet rational decisions of emitting more greenhouse gas thereby adversely affecting the firm’s long-run sustainability. Our result is robust to several endogeneity tests including a quasi-natural experiment. Our finding also suggest that to mitigate potential adverse reactions from stakeholders, carbon emitting firms with risk-averse CEOs tend to spend more on CSR activities. Much of the heterogeneity in our results (...) are attributed to companies with weaker governance, powerful CEOs, and operating in a competitive product market. Overall, contrary to conventional wisdom, CEO preference toward risk-aversion can often lead to unethical outcomes (environmental degradation) and especially appears to be a key determinant for firm-level carbon emissions. (shrink)

In this study, we examine the empirical association between corporate social responsibility and information asymmetry by investigating their simultaneous and endogenous effects. Employing an extensive U.S. sample, we find an inverse association between CSR engagement and the proxies of information asymmetry after controlling for various firm characteristics. The results hold using 2SLS considering the reverse side of information asymmetry influencing CSR activities. The results also hold after mitigating endogeneity based on the dynamic panel system generalized method of moment. Furthermore, the (...) CSR–information asymmetry relation is amplified in high-risk firms due to managers’ efforts to build a good reputation. Last, we find that CSR engagement is inversely associated with reputational risk measure and lower predicted value of reputational risk is positively associated with lower information asymmetry measures. We interpret these results as supporting the stakeholder theory-based, reputation-building explanation that considers CSR engagement as a vehicle to build and maintain firm reputation thereby enhancing the information environment. (shrink)

Do firms gain environmental legitimacy when they conform to external expectations regarding the natural environment? Drawing on institutional logic and signaling theory, we investigate sources of heterogeneity in the impacts of environmental actions on environmental legitimacy. Longitudinal data about 325 publicly traded U.S. firms in polluting industries support the notion that environmental actions help firms gain environmental legitimacy. However, some actions instead can harm this legitimacy if environmental performance deteriorates and the firm is subject to intense scrutiny from nongovernmental organizations. (...) Thus, an important contribution of this research is to identify conditions under which greenwashing can backfire. (shrink)

A unique dataset is exploited to provide insight into the impact of management quality practices on corporate social responsibility for a sample of US manufacturing firms. Our results suggest that MQPs are positively and significantly related to a firm’s CSR rating. This confirms that intangible assets affect corporate outcomes. We also show that superior MQPs matter more in explaining the CSR dimensions that are related directly to the firm’s primary stakeholders.

Using a large sample of 3,040 U.S. firms and 16,606 firm-year observations over the 1991–2010 period, we find strong evidence that firm internationalization is positively related to the firm’s corporate social responsibility rating. This finding persists when we use alternative estimation methods, samples, and proxies for internationalization and when we address endogeneity concerns. We also provide evidence that the positive relation between internationalization and CSR rating holds for a large sample of firms from 44 countries. Finally, we offer novel evidence (...) that firms with extensive foreign subsidiaries in countries with well-functioning political and legal institutions have better CSR ratings. Our findings shed light on the role of internationalization in influencing multinational firms’ CSR activities in the U.S. and around the world. (shrink)