Fraud in the reward-based crowdfunding market has been of concern to regulators, but it is arguably of greater importance to the nascent industry itself. Despite its significance for entrepreneurial finance, our knowledge of the occurrence, determinants, and consequences of fraud in this market, as well as the implications for the business ethics literature, remain limited. In this study, we conduct an exhaustive search of all media reports on Kickstarter campaign fraud allegations from 2010 through 2015. We then follow up until (...) 2018 to assess the ultimate outcome of each allegedly fraudulent campaign. First, we construct a sample of 193 fraud cases, and categorize them into detected vs. suspected fraud, based on a set of well-defined criteria. Next, using multiple matched samples of non-fraudulent campaigns, we determine which features are associated with a higher probability of fraudulent behavior. Second, we document the short-term negative consequences of possible breaches of trust in the market, using a sample of more than 270,000 crowdfunding campaigns from 2010 through 2018 on Kickstarter. Our results show that crowdfunding projects launched around the public announcement of a late and significant misconduct detection (resulting in suspension) tend to have a lower probability of success, raise less funds, and attract fewer backers. (shrink)

ABSTRACT:We examine whether religion influences company decisions related to corporate community involvement. Employing a large US sample, we show that the CCI initiatives of a company are positively associated with the level of Christian religiosity present in the region within which that company’s headquarters is located. This association persists even after we control for a wide range of firm characteristics and after we subject our results to several econometric tests. These results support our religious morality hypothesis which holds that companies (...) headquartered in regions with higher levels of Christian religiosity will engage in more CCI initiatives. We also find that while Catholic and mainline Protestant religiosity have a positive influence on firms’ CCI initiatives, evangelical Protestant religiosity does not. This supports our differentiated responses hypothesis which holds that institutional differences among religious groups will produce different effects on companies’ CCI. This hypothesis is based on institutional theory. (shrink)

The World Bank recently noted: “Social license to operate has traditionally referred to the conduct of firms with regard to the impact on local communities and the environment, but the definition has expanded in recent years to include issues related to worker and human rights”. In this paper, we examine a factor that can influence the kind of work conditions that can facilitate or obstruct a firm’s attempts to achieve the social license to operate. Specifically, we examine the empirical association (...) between a company’s employee practices and the religiosity of its local community by investigating their fixed and endogenous effects. Using a large and extensive U.S. sample, we find a positive association between the “employee friendly” practices of a firm and the religiosity of the local community after controlling for several firm characteristics. In addition, after mitigating endogeneity with the dynamic panel system generalized method of moment and after employing several other econometric tests, we still find a robust positive association between the religiosity of the local community and employee-friendly practices. Since recent research has shown that the firm’s treatment of its stakeholders is a key to achieving an SLO, and since employees constitute a highly significant stakeholder group, we interpret our results as supporting the view that religion is an important influence on the kinds of employee practices that can increase the likelihood that a firm will acquire the SLO. (shrink)

The Global Reporting Initiative (GRI) guidelines have emerged as an important instrument used by firms to structure the content of sustainability reporting (SR). This development has led to the question of whether the elaboration of GRI SR is beneficial to a firm’s financial performance. In this study, building on signaling theory, we carry out an empirical investigation of the impact of GRI SR on firm profitability and the factors moderating that impact. Drawing from the China Stock Market and Accounting Research (...) (CSMAR), the WIND Economic, and the Chinese Research Data Services Platform (CNRDS) databases, we identified a sample of 122 listed firms with GRI SR in China. We then employed an event study method to compare the firms following GRI SR with a set of matched firms reporting sustainability without following the GRI guidelines. The results show that GRI SR significantly increases firm profitability. Moreover, firms with local political ties reap more benefits from GRI SR, while the moderating effect of central political ties is not significant. Surprisingly, the performance impact of GRI SR is negatively correlated to the firm’s internationalization level. (shrink)

We examine the effect of the cross-border merger and acquisition (M&A) activities of Chinese firms on their corporate social responsibility (CSR) performance. We find that Chinese acquirers significantly increase CSR performance and CSR spending following cross-border M&As. The legal origins and social norms of host countries are found to positively affect the acquirers’ CSR performance and CSR spending in the post-M&A period. The results are consistent with Chinese acquirers signaling their commitment toward CSR through cross-border M&As to respond to diverse (...) stakeholder demands and strengthen corporate reputation. We also provide evidence that Chinese firms’ knowledge acquisition through cross-border M&As boosts green innovation. In addition, we show that the financial performance of Chinese acquirers does not suffer in the long term, indicating that strategic CSR investments can be integrated with other corporate investment activities. Our study demonstrates how cross-border M&As affect stakeholder value beyond value for shareholders. (shrink)

This paper investigates the corporate social responsibility (CSR) structures of U.S. listed firms. We find evidence of a general tendency towards CSR specialization with almost three-quarters (73.91%) of these firms focusing on a single CSR dimension. The degree of specialization varies across industries and the single CSR dimension focused on also varies for industries with similar degrees of specialization. We find that firms with higher exposures to CSR concerns, international activities, larger size, and higher financial slack tend to diversify across (...) multiple CSR dimensions. More importantly, we find evidence that diversified CSR structures positively affect a firm’s value relative to a control group before and during the 2008 financial crisis. Our findings have important implications for corporate and portfolio managers, investors, and policy makers. (shrink)

Using a sample of 21,030 US firm-year observations that represents more than 3000 individual firms over the 1998–2012 period, we investigate the relationship between Corporate Social Responsibility (CSR) and investment efficiency. We provide strong and robust evidence that high CSR involvement decreases investment inefficiency and consequently increases investment efficiency. This result is consistent with our expectations that high CSR firms enjoy low information asymmetry and high stakeholder solidarity (stakeholder theory). Moreover, our findings suggest that CSR components that are directly related (...) to firms’ primary stakeholders (e.g. employee relations, product characteristics, environment, and diversity) are more relevant in reducing investment inefficiency compared with those related to secondary stakeholders (e.g. human rights and community involvement). Finally, additional results show that the effect of CSR on investment efficiency is more pronounced during the subprime crisis. Taken together, our results highlight the important role that CSR plays in shaping firms’ investment behaviour and efficiency. (shrink)

We study behind-the-scenes investor activism promoting environmental, social, and governance improvements by means of a proprietary dataset of a large international, socially responsible activist fund. We examine the activist’s target selection, forms of engagement, impact on ESG performance, drivers of success, and effects on the targets’ operations and value creation. Target firms are typically large and visible, perform well, and have high liquidity and low ESG performance. Engagement induces ESG rating adjustments: firms with poor ex ante ESG ratings experience a (...) ratings increase after complying with the activist’s demands, whereas firms with high ex ante ESG ratings experience a ratings decrease following the revelation of their ESG problems. Activism that is focused on environmental and social issues is more likely to succeed if targets are ESG-sensitive. Successful engagements boost targets’ sales. Risk-adjusted excess stock returns of successful engagements outperform those of unsuccessful engagements by 2.7%. Results are especially strong for firms with low ex ante ESG scores. Specifically, targeted firms in the lowest ex ante ESG quartile outperform matched peers by 7.5% in the year after the end of the engagement. Our results thus suggest that the activism regarding corporate social responsibility generally improves ESG practices and corporate sales and is profitable to the activist. Taken together, we provide direct evidence that ethical investing and strong financial performance, both from the activist’s and the targeted firm’s perspective, can go hand-in-hand together. (shrink)

We provide new evidence that the prosocial attitudes of local residents play a significant role in determining a firm’s corporate social responsibility engagement. We show that firms are more likely to engage in CSR initiatives when they are headquartered in areas with large senior citizen populations and where a large fraction of the population makes charitable donations. In contrast, we find that firms are less likely to engage in CSR initiatives when they are headquartered in areas with large religiously affiliated (...) groups. After establishing the local demographic roots of CSR demand, we then examine the relationship between the firm’s CSR activities and its market valuation. Our results suggest that CSR initiatives create value when they are properly aligned with local residents’ prosocial attitudes. Overall, our study stresses the role of local residents’ CSR preferences in mediating the relationship between CSR and market valuations. (shrink)

Prior studies in business ethics highlight the role of philanthropy in shaping stakeholders’ perceptions of a firm’s underlying moral tendencies and values. Scholars argue that philanthropy-based character inferences influence whether and how stakeholders engage with firms. We extend this line of reasoning to examine the impact of philanthropy on firms’ contracting costs in the capital market. We posit that philanthropy-based character inferences reduce investors’ agency concerns, thereby reducing firms’ cost of capital. We also posit that the strength of the philanthropy–cost (...) of capital relationship is contingent on uncertainty regarding a firm’s character, visibility of a firm, and prevailing philanthropic norms. We test and find support for our arguments in a longitudinal study of philanthropy and the cost of capital. Our findings have implications for business ethics research on corporate philanthropy and corporate social performance and for organizational research on social judgment. (shrink)

Using a panel data of 806 U.S. firms from 2006 to 2015, we find that in their ratings of corporate social responsibility performance, firms with top managers who attended religiously affiliated schools outperform their peers with no such managers. The positive relationship between religious school attendance and CSR performance is stronger among firms with lower level of community religiosity or less external monitoring. Our findings lend support to early theoretical work that suggests managerial CSR-oriented values can be key motivating factors (...) for CSR initiatives. (shrink)

This study investigates the variations in the quality and comprehensiveness of 104 corporate social responsibility reports published by the world’s largest financial institutions in 2012. Using a novel measure of CSR report quality, we examine the impact of certain national, legal, and firm-level factors that might explain differences in the overall quality and extent of coverage of various issues in these reports. Our findings show that legal factors and CSR environment in a firm’s country of headquarters play an important role (...) in firms’ CSR reporting quality. Common law countries exhibit systematically higher overall CSR reporting quality than code law countries. Countries with higher CSR standards, policies, and regulations in place also produce significantly higher quality CSR reports. Firm size, on the other hand, has no major impact on the overall quality of CSR reports. In further analysis of the individual aspects of CSR disclosures, namely environment, philanthropy, bribery and corruption, and integrity assurance, we document that larger firms report at a higher quality on philanthropy and bribery and corruption. Bribery and corruption is reported at a higher quality in countries with common law tradition, high-quality legal regimes, and high CSR standards and regulations in place. We also observe higher quality integrity assurance in common law countries. CSR-minded countries and countries with low-quality legal environment also report on philanthropy at a higher quality. Finally, we offer guidelines for companies toward improving the quality of their reports, and suggestions for scholars and researchers for further avenues of research. (shrink)

Prior research suggests that the media plays an important information intermediary role in capital markets. We investigate the role of the media in influencing firms’ engagement in corporate social responsibility activities. Using a large sample of 4396 unique firms from 42 countries over the period 2003–2012, we find strong evidence that firms engage in more CSR activities if located in countries where the media has more freedom. This relation is robust to using various proxies for media freedom, an alternative source (...) of CSR data, and to applying the instrumental variables approach to address endogeneity. In additional analyses, we find that the positive relation between media freedom and CSR engagement is stronger for better governed firms and for larger firms. Since the media have the ability to impact reputational capital, we conclude that media freedom affects firms’ incentives to engage in costly CSR activities. (shrink)

In countries such as China, where Confucianism is the backbone of national culture, high-social-status entrepreneurs are inclined to engage in corporate social responsibility activities due to the perceived high stress from stakeholders and high ability of doing CSR. Based on a large-scale survey of private enterprises in China, our paper finds that Chinese entrepreneurs at private firms who have high social status are prone to engage in social responsibility efforts. In addition, high-social-status Chinese entrepreneurs are even more likely to engage (...) in social responsibility efforts as they become more politically connected and as the region becomes more market-oriented. These findings extend the upper echelons perspective of CSR into Chinese context by shedding light on antecedents of CSR from a new perspective and clarifying the boundary conditions of the social status–CSR link from the institutional perspective. (shrink)

This study seeks to shed light on the effect of star CEOs on the environmental, social, and governance (ESG) performance of Chinese firms. Relying on the theoretical perspective of role identity and role constraints, we analyze data from 1222 Chinese firms listed on the Shanghai and Shenzhen Stock Exchanges from 2006 to 2019. The results analyzed using the ordinary least squares estimate method reveal a positive effect of star CEOs' extreme confidence and legitimacy pressure mechanisms on ESG performance. We also (...) find that this positive relationship is negatively moderated by higher organizational slack but strengthened by a lower level of regional marketization, as the degree of firms' dependence on external stakeholders' resources differs significantly. Additionally, this study finds that ESG activities are less likely to be associated with firm performance if star CEOs pursue them to satisfy their need for star status. These findings supplement the early tests of the influence mechanism of star CEOs on organization-level results and expand the context discussion of role identity and role constraints theory in the Chinese institutional environment. (shrink)

Business Ethics: A European Review, EarlyView.

This study empirically analyzes how corporate social responsibility performance feedback impacts CSR performance, focusing on the performance feedback perspective of behavioral theory of the firm. By performing generalized least squares regression analysis based on Korean company data from 2012 to 2019, we presented evidence that positive social and historical performance feedback had a positive effect on CSR performance. Our results provide evidence that firms with higher social and historical CSR performance than CSR aspiration may have higher CSR performance than those (...) that do not. (shrink)

Does CEO tolerance to risk affect a firm’s long-run sustainability? Using CEO insider debt holding, we show that CEO’s risk-aversion encourages immoral yet rational decisions of emitting more greenhouse gas thereby adversely affecting the firm’s long-run sustainability. Our result is robust to several endogeneity tests including a quasi-natural experiment. Our finding also suggest that to mitigate potential adverse reactions from stakeholders, carbon emitting firms with risk-averse CEOs tend to spend more on CSR activities. Much of the heterogeneity in our results (...) are attributed to companies with weaker governance, powerful CEOs, and operating in a competitive product market. Overall, contrary to conventional wisdom, CEO preference toward risk-aversion can often lead to unethical outcomes (environmental degradation) and especially appears to be a key determinant for firm-level carbon emissions. (shrink)

This paper examines whether a firm’s financial performance is associated with superior environmental, social and governance scores in emerging markets of multinationals in Latin America. The study addresses the current research gap on this issue; it develops hypotheses and tests them by applying linear regressions with a data panel drawn from the Thomson Reuters Eikon™ database to analyse data on 104 multinationals from Brazil, Chile, Colombia, Mexico and Peru between 2011 and 2015. The results suggest that the relationship between the (...) ESG score and FP is significantly statistically negative. Furthermore, in examining environmental, social and governance separately to accurately determine each variable’s relationship to multilatinas’ FP, the results reveal a negative relationship. Finally, the empirical analysis provides evidence for a moderating effect of financial slack and geographic international diversification on the relationship between ESG dimensions and firms’ FP. This study furthers understanding of the relationship between ESG dimensions and FP for the Latin American business context. (shrink)

The disclosure of corporate environmental performance is an increasingly important element of a firm’s ethical behavior. We analyze how the legal origin of foreign institutional investors affects a firm’s voluntary greenhouse gas emissions disclosure. Using a large sample of firms from 36 countries, we show that foreign institutional ownership from civil law countries improves the scope and quality of a firm’s greenhouse gas emissions reporting. This relation is robust to addressing endogeneity and selection biases. The effect is more pronounced in (...) firms from non-climate-sensitized countries, for which the gap between firms’ environmental standards and investors’ environmental targets is potentially larger, and in less international firms. Firms with a higher level of voluntary greenhouse gas emissions disclosure also exhibit higher valuations. (shrink)

Accountability for corporate social responsibility (CSR) and its societal challenges is undetermined, and it is unclear whether business or society should carry these responsibilities. Despite severe criticism from some, many organizations continue to invest in and promote CSR. The purpose of this multiple-case study was to increase the understanding of the phenomenon from the perspective of a purposeful sample of participants who contribute to CSR execution and who were representatives of the 10 organizations identified as active promoters. The participant corporations (...) (case studies), in Europe and North America, were mainly in the telecommunications industry. Study data came from 11 face-to-face, semistructured interviews with chief executive officers (CEOs) and other CSR key participants, a review of corporate archival records, and a review of other sources regarding the effective implementation of CSR in these organizations. The conceptual framework consisted of Carroll’s constructs of CSR based on economic, legal, social, and discretionary elements. The constant comparative method was used to analyze the interview data and identify factors leading corporations to continue to engage in CSR. These factors were economic, social impact, legal compliance, or good reputation, sponsored by transformational or adaptive leaderships and endorsed by visionary CEOs. The findings may enlighten and motivate other organizations to engage in CSR programs and connect stakeholders’ contribution to a broadened positive social change. (shrink)