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Trust and corporate social responsibility: Evidence from CEO’s early experience

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  • Kong, Dongmin
  • Piao, Yin
  • Zhang, Wenzhe
  • Liu, Chenhao
  • Zhao, Ying

Abstract

While previous literature has paid much attention on the effects of trust as an informal institution on economic growth and corporate behavior, it is unclear whether and how the trust affects the corporate social responsibility (CSR). In this study, we use CEOs’ early experiences on trust to assess the effect of CEO’s personal trust on CSR based on a difference-in-differences design. We find that CEOs with low trust levels are more inclined to be socially responsible. Mechanistically, CEOs are willing to take the initiative to fulfill their social responsibility due to risk aversion and concern for corporate development brought about by poor trust. After excluding competing explanations for the effects of early experience on human capital accumulation and health endowment, the results on the impact of trust on CSR remain robust. The inhibitory effect of trust on CSR is more pronounced in conditions of higher levels of external corporate governance, low financing constraints, and low analyst attention and among state-owned enterprises. The findings of this paper emphasize the important role of informal institutions in CSR performance.

Suggested Citation

  • Kong, Dongmin & Piao, Yin & Zhang, Wenzhe & Liu, Chenhao & Zhao, Ying, 2023. "Trust and corporate social responsibility: Evidence from CEO’s early experience," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 585-596.
    • Handle: RePEc:eee:ecanpo:v:78:y:2023:i:c:p:585-596
    DOI: 10.1016/j.eap.2023.04.003
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    4. Huang, Ruilei & Wei, Jiuchang, 2023. "Does CEOs’ green experience affect environmental corporate social responsibility? Evidence from China," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 205-231.
    5. Li, Quan & Sun, Haodan & Tao, Yunqing & Ye, Yongwei & Zhan, Kaiyan, 2023. "The fault-tolerant and error-correction mechanism and capital allocation efficiency of state-owned Enterprises in China," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).

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