Do firms with more powerful CEOs and greater visibility have better social reputation?

Abstract

Abstract Purpose – In addition to financial performance, firms are increasingly trying to obtain a social reputation from their CSR engagement within society due to reputational benefits. Thus, we seek to highlight two facilitators of social reputation which may help firms realize their targets. Hence, drawing on the signalling, stewardship, and legitimacy theories, our aim is to investigate whether CEO power and firm visibility help translate CSR engagement into greater social reputation, proxied by CSR awarding. Design/methodology/approach - Adopting a cross-country and cross-industry sample of 52,549 observations between 2002 and 2021, we run a fixed effects regression analysis. Findings - We found that greater CSR engagement leads to better social reputation. Furthermore, CEO power and greater firm visibility foster a positive association between CSR engagement and social reputation. Our results are robust to endogeneity concerns, which were addressed by propensity score matching, entropy balancing, instrumental variable regression analysis, alternative samples and regulatory changes. Practical implications - Although the CEOs’ power is severely criticized in the corporate governance literature due to its weakening effect on board monitoring ability, we found that it is beneficial for firms seeking to improve their social reputation. This outcome may help firms shape their upper management structure for greater social reputation gains from CSR engagement. Furthermore, more visible firms achieve greater social reputation through their CSR engagement, which could help managers co-consider firms’ advertising–CSR awarding engagements and budget their financial resources accordingly. Originality - Increasing the CSR engagement of firms has prompted investigations into how firms may better benefit from this investment. However, despite considerable research interest in the financial return of CSR engagement, the social reputation that firms derive from CSR engagement has not been sufficiently addressed. Thus, we examine whether two corporate mechanisms, CEO power and firm visibility, could help firms translate CSR engagement into improved social reputation, proxied by CSR awarding.