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Corporate Social Responsability and Managerial Entrenchment

Author

Listed:
  • Giovanni Cespa
  • Giacinta Cestone

Abstract

When stakeholder protection is left to the voluntary initiative of managers, relations with social activists may become an effective entrenchment strategy for inefficient CEOs. We thus argue that managerial turnover and firm value are increased by the institutionalization of stakeholder protection depriving incumbent CEOs of activists' support. This finding provides a rationale for the emergence of specialized institutions (social auditors and ethic indexes) that help firms commit to stakeholder protection even in case of managerial replacement. Our theory also explains a recent trend whereby social activist organizations and institutional shareholders are showing a growing support for each others' agenda.

Suggested Citation

  • Giovanni Cespa & Giacinta Cestone, 2004. "Corporate Social Responsability and Managerial Entrenchment," Working Papers 139, Barcelona Graduate School of Economics.
  • Handle: RePEc:bge:wpaper:139
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    File URL: http://www.barcelonagse.eu/sites/default/files/working_paper_pdfs/139.pdf
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    References listed on IDEAS

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    1. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    2. Ambec, Stefan & Barla, Philippe, 2002. "A theoretical foundation of the Porter hypothesis," Economics Letters, Elsevier, vol. 75(3), pages 355-360, May.
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    Cited by:

    1. Eduard Alonso-PaulĂ­, 2007. "Contracting with a quiet life manager," Working Papers 07.19, Universidad Pablo de Olavide, Department of Economics.

    More about this item

    Keywords

    Corporate Governance; Corporate Social Responsability; Managerial Entrenchment; Social Activism; Stakeholders;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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