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Termination risk and CSR: A behavioral perspective

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  • Haider, Zulfiquer Ali
  • Sheikh, Shahbaz

Abstract

We explore the psychology of a CEO facing high termination risk and its ramifications on corporate social responsibility (CSR). We draw on prospect theory to argue that loss-averse CEOs, when faced with termination risk, will make risky decisions and reduce investment in CSR. Empirical analyses on hand-collected and archival data from 1995 to 2018 provides support that CSR is likely to be lower in firms where CEOs face high termination risk. Additionally, we find that strong corporate governance and longer tenure reduce the negative effect of termination risk on CSR. These results are robust to alternative specifications.

Suggested Citation

  • Haider, Zulfiquer Ali & Sheikh, Shahbaz, 2025. "Termination risk and CSR: A behavioral perspective," Finance Research Letters, Elsevier, vol. 86(PD).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pd:s1544612325018689
    DOI: 10.1016/j.frl.2025.108614
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    References listed on IDEAS

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