Corporate misconduct and corporate social responsibility: the roles of CEO incentives and institutional ownership

PurposeThis study aims to examine why executives increase investments in corporate social responsibility (CSR) as a strategic action to protect their firms' reputation from the possibility of a contagion effect following CSR-related corporate misconduct in the industry by drawing on an impression management perspective. This study also examines internal and external governance mechanisms as boundary conditions.Design/methodology/approachThe sample includes panel data of firms listed in the S&P 500 index from 2009 to 2013. The authors used firm fixed-effects models to test the hypotheses.FindingsThe results show that recent CSR-related corporate misconduct occurred in other firms, inducing executives to increase investments in CSR. Moreover, internal and external governance mechanisms, which are CEO incentives and institutional ownership, moderated the relationship.Originality/valueThis study contributes to prior literature on the factors influencing CSR at the multilevel of analysis by examining how recent CSR-related corporate misconduct in the industry interacts with corporate governance mechanisms as boundary conditions to influence firm commitment to CSR.