CSR Performance: Governance Insights from Dual-Class Firms
Document Type
Book Chapter
Keywords
Dual-class; Corporate Social Responsibility; Shareholder Pressure; Quiet Life; Short Termism; Cash Flow Wedge
Identifier Data
https://doi.org/10.1108/S1574-076520200000023002
Publisher
Emerald Group Publishing Limited
Publication Source
Research on Professional Responsibility and Ethics in Accounting
Rights Management
Copyright © 2020 Emerald Publishing Limited
Abstract
The authors’ examination of corporate social responsibility (CSR) scores in dual-class firms provides a window on firms’ CSR performance when insulated from external pressure. Dual-class ownership confers greater voting rights on a superior class of shares held by insiders; consequently, managers of dual-class firms are insulated from external pressure from inferior class shareholders and, potentially, from society. The authors compare CSR scores in dual- and single-class firms and investigate the association between CSR scores and cash flow rights in dual-class firms. This analysis reveals that dual-class firms have lower CSR scores than their single-class counterparts and that CSR scores in dual-class firms are positively related to the relative cost of CSR borne by the superior class of shares. The findings suggest that external accountability encourages CSR performance, and CSR performance is higher when the superior class bears a smaller portion of the cost of CSR activities. It follows that the analysis suggests the importance of governance structures for encouraging CSR, and the dampening impact of cost to CSR performance.
