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Asian Review of Financial Research Vol.34 No.3 pp.25-63 https://www.doi.org/10.37197/ARFR.2021.34.3.2
CEO Inside Debt and CSR : The Impact of CEO Retirement and Product Market Competition
Kyumin Cho Senior Researcher, Daishin Economic Research Institute
Seung Hun Han Professor, KAIST
Hyeong Joon Kim* Ph.D. candidate, KAIST
Sangsoo Kim Professor, Hankuk University of Foreign Studies
Key Words : Corporate social responsibility, CEO compensation, CEO inside debt, Risk management, Risk concerns

Abstract

Previous literature posits that CEOs with inside debt holdings are more likely to engage in corporate social responsibility (CSR) since they respond to bondholders' demands as their appetite for risk decreases. This study examines whether a CEO's risk concerns moderate the effect of CEO inside debt holdings on the firm's CSR performance. We find that the positive relationship between CEO inside debt and CSR is weakened when CEOs are close to retirement, or when firms face less product market competition within their respective industries. Our results also suggest that the effect of CEO inside debt, as well as the moderating effect of CEO retirement and low competition, differs between internal and external stakeholder CSR. Furthermore, we find that the moderating effect of CEO retirement is strongly supported in propensity score matching analysis and alternative model specification, whereas that of low competition is weakly supported. Overall, this study has important policy implications for board members, managers, investors, and regulators as it highlights that CEOs' compensation structure and risk concerns can be determinants of corporate sustainability policies.
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