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You Say Tough, I Say Hope: An Effect of CEO Regulatory Focus on Corporate Social Performance under Challenging Market Conditions

Author

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  • Seunghye Lee

    (Sogang Business School, Sogang University, Seoul 04107, Republic of Korea)

  • Rami Jung

    (College of Social Sciences, Hansung University, Seoul 02876, Republic of Korea)

Abstract

This study explores the effect of CEO regulatory focus (i.e., promotion vs. prevention) on corporate social performance (CSP). Given that corporate social activities are an outcome-uncertain risky investment, we propose that CEOs with promotion focus (vs. prevention focus) would actively seek CSP, since promotion focus involves risk-taking propensity and prevention focus involves risk-avoiding behavior. We further propose that such a tendency should be more pronounced, especially when market conditions are uncertain. Using a panel sample of U.S. listed firms and conducting content analysis of CEO letters in annual reports, we found that only promotion-focused CEOs tend to promote CSP, and such a tendency is more salient in tough market conditions where firms face a lower level of munificence and a higher level of stakeholder expectation in the markets. We conclude that promotion-focused CEOs tend to seek hope even when situations are hopeless.

Suggested Citation

  • Seunghye Lee & Rami Jung, 2023. "You Say Tough, I Say Hope: An Effect of CEO Regulatory Focus on Corporate Social Performance under Challenging Market Conditions," Sustainability, MDPI, vol. 15(6), pages 1-16, March.
    • Handle: RePEc:gam:jsusta:v:15:y:2023:i:6:p:5555-:d:1103811
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    References listed on IDEAS

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