Local boy does good: The effect of CSR activities on firm value

Zicheng Lei; Dimitris  Petmezas; P. Raghavendra Rau; Chen  Yang

Local boy does good: The effect of CSR activities on firm value

Zicheng Lei, Dimitris Petmezas, P. Raghavendra Rau, Chen Yang

Accounting & Financial Management

Research output: Contribution to journal › Article › peer-review

Abstract

We examine the relation between home CEOs and corporate social responsibility (CSR). Our analysis shows home CEOs are associated with higher CSR engagement and increased firm value. These firms exhibit higher asset turnover, lower cost of equity, improved productivity, sales, and profit margins. Home CEOs focus more on community, environmental, and employee-related CSR, and are linked to reduced carbon emissions. This relationship is stronger in firms with higher local business concentration and investor monitoring. Firms led by home CEOs earn higher returns during recent crises. Our results suggest the value increase is not primarily due to agency effects and remain robust to endogeneity concerns. The study indicates a CEO’s community connection may influence CSR effectiveness, suggesting that mere CSR engagement may not suffice to boost trust and value. These results highlight the potential importance of local ties in corporate leadership and CSR strategy.

Original language	English
Journal	Journal of Banking & Finance
Publication status	Accepted/In press - 29 Jan 2025

Cite this

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title = "Local boy does good: The effect of CSR activities on firm value",

abstract = "We examine the relation between home CEOs and corporate social responsibility (CSR). Our analysis shows home CEOs are associated with higher CSR engagement and increased firm value. These firms exhibit higher asset turnover, lower cost of equity, improved productivity, sales, and profit margins. Home CEOs focus more on community, environmental, and employee-related CSR, and are linked to reduced carbon emissions. This relationship is stronger in firms with higher local business concentration and investor monitoring. Firms led by home CEOs earn higher returns during recent crises. Our results suggest the value increase is not primarily due to agency effects and remain robust to endogeneity concerns. The study indicates a CEO{\textquoteright}s community connection may influence CSR effectiveness, suggesting that mere CSR engagement may not suffice to boost trust and value. These results highlight the potential importance of local ties in corporate leadership and CSR strategy.",

author = "Zicheng Lei and Dimitris Petmezas and Rau, {P. Raghavendra} and Chen Yang",

year = "2025",

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journal = "Journal of Banking & Finance",

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AU - Lei, Zicheng

AU - Petmezas, Dimitris

AU - Rau, P. Raghavendra

AU - Yang, Chen

PY - 2025/1/29

Y1 - 2025/1/29

N2 - We examine the relation between home CEOs and corporate social responsibility (CSR). Our analysis shows home CEOs are associated with higher CSR engagement and increased firm value. These firms exhibit higher asset turnover, lower cost of equity, improved productivity, sales, and profit margins. Home CEOs focus more on community, environmental, and employee-related CSR, and are linked to reduced carbon emissions. This relationship is stronger in firms with higher local business concentration and investor monitoring. Firms led by home CEOs earn higher returns during recent crises. Our results suggest the value increase is not primarily due to agency effects and remain robust to endogeneity concerns. The study indicates a CEO’s community connection may influence CSR effectiveness, suggesting that mere CSR engagement may not suffice to boost trust and value. These results highlight the potential importance of local ties in corporate leadership and CSR strategy.

AB - We examine the relation between home CEOs and corporate social responsibility (CSR). Our analysis shows home CEOs are associated with higher CSR engagement and increased firm value. These firms exhibit higher asset turnover, lower cost of equity, improved productivity, sales, and profit margins. Home CEOs focus more on community, environmental, and employee-related CSR, and are linked to reduced carbon emissions. This relationship is stronger in firms with higher local business concentration and investor monitoring. Firms led by home CEOs earn higher returns during recent crises. Our results suggest the value increase is not primarily due to agency effects and remain robust to endogeneity concerns. The study indicates a CEO’s community connection may influence CSR effectiveness, suggesting that mere CSR engagement may not suffice to boost trust and value. These results highlight the potential importance of local ties in corporate leadership and CSR strategy.

M3 - Article

JO - Journal of Banking & Finance

JF - Journal of Banking & Finance

ER -

Local boy does good: The effect of CSR activities on firm value

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