This study aims to examine why executives increase investments in corporate social responsibility (CSR) as a strategic action to protect their firms’ reputation from the possibility of a contagion effect following CSR-related corporate misconduct in the industry by drawing on an impression management perspective. This study also examines internal and external governance mechanisms as boundary conditions.
The sample includes panel data of firms listed in the S&P 500 index from 2009 to 2013. The authors used firm fixed-effects models to test the hypotheses.
The results show that recent CSR-related corporate misconduct occurred in other firms, inducing executives to increase investments in CSR. Moreover, internal and external governance mechanisms, which are CEO incentives and institutional ownership, moderated the relationship.
This study contributes to prior literature on the factors influencing CSR at the multilevel of analysis by examining how recent CSR-related corporate misconduct in the industry interacts with corporate governance mechanisms as boundary conditions to influence firm commitment to CSR.
