IDEAS home Printed from https://ideas.repec.org/a/gam/jrisks/v13y2025i3p42-d1599236.html
   My bibliography  Save this article

Managerial Incentives and Firm Risk Taking: The Mediating Role of Corporate Social Responsibility

Author

Listed:
  • Desheng Yin

    (School of Economics and Management, East China Normal University, Shanghai 20062, China)

  • Michael Wang

    (Department of Statistics, The Ohio State University, Columbus, OH 43201, USA)

  • Yufan Sun

    (Stuart School of Business, Illinois Institute of Technology, Chicago, IL 60016, USA)

  • Haizhi Wang

    (Stuart School of Business, Illinois Institute of Technology, Chicago, IL 60016, USA)

  • Xinting Zhen

    (Department of Business Administration and Accounting, Saint Michael’s College, Burlington, VT 05446, USA)

Abstract

In this study, we focus on managerial incentives provided by debt-like compensation and further investigate whether and to what extent such managerial incentives may affect CEOs’ decisions on risk management. Building on cumulative prospect theory and instrumental stakeholder theory, we propose that CEOs tend to have risk-reduction incentives if they are paid with debt in their own firms, and that firm engagement in corporate social responsibility (CSR) activities can mediate the relationship between debt-like compensation and firm risk taking. In addition, we posit that the mediated relationship between CEO debt-like compensation and firm risk taking is contingent, and we propose environmental dynamism and munificence as two such contingencies that moderate the mediated process. Using a large longitudinal dataset of nonfinancial U.S. firms, we document strong supportive evidence for these hypotheses.

Suggested Citation

  • Desheng Yin & Michael Wang & Yufan Sun & Haizhi Wang & Xinting Zhen, 2025. "Managerial Incentives and Firm Risk Taking: The Mediating Role of Corporate Social Responsibility," Risks, MDPI, vol. 13(3), pages 1-21, February.
    • Handle: RePEc:gam:jrisks:v:13:y:2025:i:3:p:42-:d:1599236
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-9091/13/3/42/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-9091/13/3/42/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Roy L. Simerly & Mingfang Li, 2000. "Environmental dynamism, capital structure and performance: a theoretical integration and an empirical test," Strategic Management Journal, Wiley Blackwell, vol. 21(1), pages 31-49, January.
    2. Nicholas Reinholtz & Philip M. Fernbach & Bart de Langhe, 2021. "Do People Understand the Benefit of Diversification?," Management Science, INFORMS, vol. 67(12), pages 7322-7343, December.
    3. Kim, Yongtae & Li, Haidan & Li, Siqi, 2014. "Corporate social responsibility and stock price crash risk," Journal of Banking & Finance, Elsevier, vol. 43(C), pages 1-13.
    4. Coles, Jeffrey L. & Daniel, Naveen D. & Naveen, Lalitha, 2006. "Managerial incentives and risk-taking," Journal of Financial Economics, Elsevier, vol. 79(2), pages 431-468, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Leon Zolotoy & Don O’Sullivan & Keke Song, 2021. "The Role of Ethical Standards in the Relationship Between Religious Social Norms and M&A Announcement Returns," Journal of Business Ethics, Springer, vol. 170(4), pages 721-742, May.
    2. Kim, Jeong-Bon & Liao, Shushu & Liu, Yangke, 2021. "Married CEOs and Stock Price Crash Risk," QBS Working Paper Series 2021/09, Queen's University Belfast, Queen's Business School.
    3. An, Suwei, 2023. "Essays on incentive contracts, M&As, and firm risk," Other publications TiSEM dd97d2f5-1c9d-47c5-ba62-f, Tilburg University, School of Economics and Management.
    4. Tu Nguyen & Sandy Suardi & Jing Zhao, 2021. "Employee Treatment and Bank Default Risk during the Credit Crisis," Journal of Financial Services Research, Springer;Western Finance Association, vol. 59(3), pages 173-208, June.
    5. Ben Lee & Shekhar Misra & Christophe Haon, 2024. "Marketers on board: The influence of marketing-experienced board members (MEBMs) on firm innovativeness inputs and the moderating roles of CEO job characteristics," Journal of the Academy of Marketing Science, Springer, vol. 52(3), pages 859-891, May.
    6. Ashrafee Hossain & Samir Saadi & Abu S. Amin, 2023. "Does CEO Risk-Aversion Affect Carbon Emission?," Journal of Business Ethics, Springer, vol. 182(4), pages 1171-1198, February.
    7. Chen, Xiaohui & Chen, Wen & Lu, Kongbiao, 2023. "Does an imbalance in the population gender ratio affect FinTech innovation?," Technological Forecasting and Social Change, Elsevier, vol. 188(C).
    8. Zhang, Zhuang & Chizema, Amon & Kuo, Jing-Ming & Zhang, Qingjing, 2022. "Managerial risk-reducing incentives and social and exchange capital," The British Accounting Review, Elsevier, vol. 54(6).
    9. Chowdhury, Hasibul & Hodgson, Allan & Hasan, Mostafa Monzur, 2022. "Does a competitive external labour market affect corporate social responsibility? Evidence from industry tournament incentives," Journal of Behavioral and Experimental Finance, Elsevier, vol. 33(C).
    10. Dunbar, Craig & Li, Zhichuan (Frank) & Shi, Yaqi, 2020. "CEO risk-taking incentives and corporate social responsibility," Journal of Corporate Finance, Elsevier, vol. 64(C).
    11. Lee, Chien-Chiang & Wang, Chih-Wei & Wu, Yu-Ching, 2023. "CEO inside debt and downside risk: Evidence from internal and external environments," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    12. Wu, Kai & Lai, Seiwai, 2020. "Intangible intensity and stock price crash risk," Journal of Corporate Finance, Elsevier, vol. 64(C).
    13. Yiqing Tan, 2024. "Local Tournament Incentives and Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 194(1), pages 211-228, September.
    14. Al Mamun, Md & Balachandran, Balasingham & Duong, Huu Nhan, 2020. "Powerful CEOs and stock price crash risk," Journal of Corporate Finance, Elsevier, vol. 62(C).
    15. Hickfang, Michael & Holder, Ulrike, 2018. "The impact of stock options on risk-taking: Founder-CEOs and innovation," Discussion Papers of the Institute for Organisational Economics 12/2018, University of Münster, Institute for Organisational Economics.
    16. Wei, Lang & Zhang, Yiling, 2023. "Nonfinancial indicators in identifying stock price crash risk," Finance Research Letters, Elsevier, vol. 52(C).
    17. Ilona Babenko & Benjamin Bennett & John M Bizjak & Jeffrey L Coles & Jason J Sandvik, 2023. "Clawback Provisions and Firm Risk," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 12(2), pages 191-239.
    18. Deshuai Hou & Luhan Shi & Hong He & Jian Xiong, 2023. "Research on the Deviation of Corporate Green Behaviour under Economic Policy Uncertainty Based on the Perspective of Green Technology Innovation in Chinese Listed Companies," Sustainability, MDPI, vol. 15(9), pages 1-27, May.
    19. Bo-Hung Chiou & Shen-Ho Chang, 2020. "Influence of Investment Efficiency by Managers and Accounting Conservatism on Idiosyncratic Risks to Investors," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 10(1), pages 1-8.
    20. Thibaut Mastrolia & Dylan Possamaï, 2018. "Moral Hazard Under Ambiguity," Journal of Optimization Theory and Applications, Springer, vol. 179(2), pages 452-500, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jrisks:v:13:y:2025:i:3:p:42-:d:1599236. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.