Managerial Talent and Corporate Social Responsibility (CSR): How Do Talented Managers View Corporate Social Responsibility?

• Author: Pornsit Jiraporn,Pattanaporn Chatjuthamard,Shenghui Tong,Manohar Singh
• Published date: 01 June 2016
• DOI: http://doi.org/10.1111/irfi.12067
• Date: 01 June 2016

Managerial Talent and Corporate

Social Responsibility (CSR): How

Do Talented Managers View

Corporate Social Responsibility?*

PATTANAPORN CHATJUTHAMARD†,PORNSIT JIRAPORN‡,

SHENGHUI TONG§AND MANOHAR SINGH¶

†SASIN Graduate Institute of Business Administration, Chulalongkorn University,

Bangkok, Thailand

‡School of Graduate Professional Studies, Pennsylvania State University, Malvern, PA

§Central University of Finance and Economics, Beijing, China and

¶Pennsylvania State University, Abington, PA

ABSTRACT

Motivated by the ongoing debate on the costs and benefits of corporate social

responsibility (CSR), we explore how talented managers view CSR invest-

ments. Based on nearly 20,000 observations across 17 years, our evidence

reveals a nonmonotonic effect of managerial talent on CSR. Exploiting a

novel measure of managerial ability, we find that talented managers view

CSR investments favorably. However,only those with especially strong talent

are in favor of CSR investments. For executives ranked above the 75th

percentile in terms of managerial talent, an increase in managerial ability

leads to more CSR investments, suggesting that these strongly talented man-

agers perceive CSR as enhancing firm performance. In contrast, for those

with weaker talent, CSR investments are negatively associated with manage-

rial ability, implying that these weakly talented managers view CSR as a

wasteful deployment of resources. Further evidence shows that our conclu-

sion is unlikely confounded by endogeneity.

JEL Classification: M14, G32, G30

I. INTRODUCTION

The debate on the costs and benefits of corporate social responsibility (CSR) has

continued for nearly four decades, both in academics as well as among practi-

tioners, corporate executives, and shareholders. Corporations spend billions of

dollars on CSR-related activities. A large and rising number of mutual funds

* Part of this research was carried out while Pornsit Jiraporn served as Visiting Scholar at SASIN

Graduate Institute of Business Administration, Chulalongkorn University. This research is funded

by The Kanchanapisek Chalermphrakiat Endowment, Office of Academic Affairs, Chulalongkorn

University, Bangkok, Thailand.

DOI: 10.1111/irfi.12067

© 2015 International Review of Finance Ltd. 2015

International Review of Finance, 16:2, 2016: pp. 265–276