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The sensitivity of corporate social performance to corporate financial performance: A “time-based†agency theory perspective

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  • Bum-Jin Park

    (Department of Business Administration, Global Business School, Soonchunhyang University, Asan-si, Republic of Korea)

  • Ki-Hoon Lee

    (Griffith Business School, Griffith University, Brisbane, QLD, Australia)

Abstract

This study focuses on micro-level phenomena and time issues that have been traditionally neglected in both corporate governance and corporate social responsibility research. Drawing on agency theory concerning time-based managerial incentives (i.e. short term and long term), we investigate which managerial incentives for compensation drive the sensitivity of corporate social performance ( CSP ) to corporate financial performance ( CFP ). Using data for publicly listed Korean firms, we found a significant and positive relationship between CSP and CFP , with this relationship strengthened in firms with high managerial ownership but insignificant in those with high earnings-based compensation. Furthermore, we found that the interaction effects of CSP and high earnings-based compensation on CFP become positive in firms with high managerial ownership, indicating that the sensitivity between CSP and CFP is driven by long-term managerial incentives. JEL Classification: M12, M14, G35

Suggested Citation

  • Bum-Jin Park & Ki-Hoon Lee, 2021. "The sensitivity of corporate social performance to corporate financial performance: A “time-based†agency theory perspective," Australian Journal of Management, Australian School of Business, vol. 46(2), pages 224-247, May.
    • Handle: RePEc:sae:ausman:v:46:y:2021:i:2:p:224-247
    DOI: 10.1177/0312896220917192
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    References listed on IDEAS

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    Cited by:

    1. Ki‐Hoon Lee & Donghoon Shin & Minwoo Lee, 2023. "Business group affiliation and corporate sustainability performance in emerging economies: Evidence from South Korea," Business Strategy and the Environment, Wiley Blackwell, vol. 32(7), pages 4503-4518, November.
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    4. Hyeong Joon Kim & Seongjae Mun & Seung Hun Han, 2023. "Corporate social responsibility and the alignment of CEO and shareholders wealth: Does a strong alignment induce or restrain CSR?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(2), pages 720-741, March.

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    More about this item

    Keywords

    Agency theory; corporate financial performance; corporate social performance; corporate social responsibility; managerial incentives;
    All these keywords.

    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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