Social media, top managers’ characteristics, and corporate social (ir)responsibility

This thesis focuses on corporate social responsibility (CSR) to explore three important determinants of corporate socially responsible or irresponsible behaviour from different theoretical perspectives. To understand what shapes firm social outcomes, existing literature has demonstrated a wide range of antecedents or determinants of CSR at the institutional, organizational, and individual levels. However, some potential institutional and managerial determinants have been overlooked, and this PhD project aims to fill these research gaps by conducting three empirical studies. At the institutional level, the first study examines the role of social media in improving CSR performance with an integrated institutional and resource dependence perspective. This study theorizes and proposes that, as the online public can provide legitimacy and resources for firms, social media can exert informal institutional pressures on CSR. The theoretical framework and hypotheses are tested by data from Chinese publicly listed firms and a representative social media platform-Sina Weibo (Chinese Twitter) between 2014 and 2018. The results show that firms with more attention or more positive sentiment from the public on social media perform better at CSR, and the positive relationships are weakened when firms are with higher state ownership or efficiency. This study contributes to the literature on the institutional determinants of CSR performance by highlighting the institutional role of social media as an under-researched informal institutional force. At the organizational and individual levels, the second and third studies address the managerial determinants of corporate social performance and corporate misconduct respectively. These two studies are building on upper echelons theory that suggests organizational outcomes could be explained by the characteristics of top managers (e.g., top management team, CEOs). For corporate social performance involving social impact on stakeholders and external interaction with society, the second study suggests CEO sociability as a potentially prominent determinant. Since the social media presence of CEOs shows their social participation and engagement tendency (being described as “social CEOs” in literature), this study examines whether social CEOs and the implication of their social media engagement have an impact on corporate social performance. A needs-affordances-consequences approach to social CEOs is developed to understand their underlying motives and ability for social contribution, as well as the moderating effect of CEOs’ social evaluation. Utilizing data of Chinese listed firms from 2009 to 2020, the empirical results show that firms with social CEOs have a higher level of corporate social performance than firms without social CEOs, and higher CEO status or better CEO reputation can further amplify this positive relationship. The second study enriches the upper echelons and CSR literature by demonstrating an unstudied but important managerial characteristic especially in the social media era that shapes firm social outcomes. The third study shifts the focus to a common form of corporate irresponsible behavior in emerging markets (i.e., accounting fraud) to discusses how the financial misconduct is shaped by top managers’ regulatory focus in China. Regulatory focus theory (RFT) proposes two kinds of regulatory focus motivating individuals, namely promotion focus (a sensitivity to gains and a desire for advancement) and prevention focus (a sensitivity to losses and a desire for security). Building on RFT and upper echelons theory, an analytical framework is built to examine whether the propensity for committing fraud varies with the types of top managers’ regulatory focus. Using a sample of 14,549 firm-year observations, the empirical findings indicate that, to ensure safety, the predominantly prevention-focused managers are more likely to commit fraud than the principally promotion-focused managers, and this positive relationship is strengthened with more negative feedback from the capital market or the media. This study extends the corporate fraud literature by introducing a novel and influential motivational attribute of top managers to explain why they engage in fraudulent behavior in the context of weak investor protection and severe principle-agent problems

Three Essays on CEO Characteristics and Corporate Decisions

Recent studies have stressed the importance of managerial fixed effects on firm investment decisions. Following this stream of research, this dissertation empirically investigates the potential effects of two major Chief Executive Officer (CEO) characteristics, i.e. risk preferences and potential mobility, on corporate decisions such as merger and acquisition (M&A) and corporate social responsibility (CSR) investments. Essay 1 examines whether the variation of M&A stock returns around the 2008 financial crisis is associated with shareholders’ increased loss aversion as a result of undergoing financial losses. The results show that acquisitions carried out by CEOs with risk-averse inducing compensation (inside debt) before and during the financial crisis creates greater shareholder gains than counterpart M&As by CEOs with risk-seeking (convex) compensation. However, this pattern is reversed in the post-crisis period, suggesting that equity holders’ risk tolerance is amplified after the financial crisis, consistent with the prospect theory predicting that economic agents become more risk-seeking subsequent to suffering a financial loss. Essay 2 investigates shareholder reactions to CSR investments undertaken by firms under the helm of CEOs with risk-averse (risk-seeking) inducing compensation contracts. The evidence shows that CSR announcements carried out by CEOs with risk-averse (risk-seeking) inducing compensation generate higher (lower) cumulative abnormal returns and post-CSR long-term performance. This pattern holds under a battery of robustness checks. In addition, firms led by CEOs with risk-averse (risk-seeking) inducing compensation contracts are less (more) likely to engage in excessive CSR decisions and associated with greater (lower) CSR information disclosure and improved financial performance. Essay 3 explores the impact of CEO mobility on M&As. Using ability and willingness to switch jobs as a proxy for CEO mobility, the evidence shows that acquiring CEOs’ mobility has a positive effect on the propensity to engage in value-increasing M&A deals. In addition, acquiring firms led by more (less) mobile CEOs are associated with higher (lower) short-term shareholder gains, realize better (worse) post-M&A long-term performance, and tend to use cash (stock) to finance M&A transactions. The empirical results are robust to potential omitted variable bias and self-selection bias. Overall, this dissertation contributes to the finance and business literature by reconciling some of the gaps left by prior studies based on unexplored thus far key managerial characteristics that truly matter in corporate decision making. Furthermore, this work empirically validates and refines recently proposed measures of CEO potential mobility that can potentially be used to address additional research issues in the future