Abstract

With the advent of the novel governance practice of CSR-contingent executive compensation, the field of strategic management has keenly discussed its implications on firms. Nevertheless, the response of stakeholders to such a relatively recent practice has received little attention. This study focuses on an important but often less considered group of stakeholders, credit stakeholders, and examines their response to the adoption of pay-for-CSR scheme in firms. Using an international sample of publicly listed firms between 2002 and 2019, we find that bank loans to firms adopting CSR-contingent executive compensation practices tend to incur a higher interest rate and to be syndicated more concentratedly, largely because lenders perceive a higher default risk. We also find that these effects become weaker when the firm has corporate governance structures that can curb agency problems, when the firm is in an industry that is subject to stricter scrutiny of CSR, when the firm is from a country or region that emphasizes CSR, and when the lender has a strong preference for CSR. The implications for executive compensation and CSR research are discussed.

About the Speaker

Dr. Stephen Gaoguang ZHOU got his Ph.D. from the Hong Kong Polytechnic University and now is an Associate Professor at Hong Kong Baptist University. He is an associate director of MBA program and a research fellow of the Centre for Sustainable Development Studies at the University. He has several publications, including Journal of International Business Studies, Journal of Accounting and Economics, Journal of Accounting, Auditing and Finance, Auditing: A Journal of Practice and Theory, Journal of Corporate Finance, Journal of Banking and Finance, Journal of Business Research, and so on. He also published a book on business sustainability in Asia.