The Moderating Effect of a Golden Parachute on the Association between CSR and Firm Value: Does Gender-Driven Innovation Matter?

We revisit the debate on whether a firm's corporate social responsibility (CSR) activities enhance firm value. Research on related topics has produced mixed results suggesting a need to further investigate factors that directly or indirectly impact the CSR–firm value association. To this end, we examine if a firm's adoption of a golden parachute (GP) moderates the relationship between CSR and firm value. We also investigate if diversity-based innovation as it pertains to the gender of executives reveals any difference in the CSR–firm value relation. Using a sample of 11,065 firm-year observations of publicly traded US firms from 2007 to 2016, we find that CSR activities are significantly and positively associated with firm value. More importantly, our study shows that for US firms that issue GPs, this severance pay strengthens this positive relationship, suggesting that CEOs with a GP engage in more value-enhancing innovative CSR projects than their counterparts without it. This finding supports the conflict resolution theory and the resource-based view of the firm. A test to examine if the gender of the corporate executives alters their behavior towards CSR when the GP protects them shows an inverse relationship between female executives and CSR–firm value association. This interesting finding lends credence to related theories suggesting that women in male-dominated fields may feel pressured to conform to the stereotype of women as less competent than men and may adopt traditionally masculine behaviors to counteract this stereotype. As they climb the corporate leadership ladder endowed with a GP, the stereotype threat may still prevail, adversely affecting the CSR–firm value outcomes. These results remain robust after a series of sensitivity tests.