CSR Performance and the Value of Cash Holdings: International Evidence

It is possible that the level of excess cash has an influence on CSR performance: firms with high value of cash holdings may invest more in CSR. Hence, we acknowledge that some of our empirical tests may suffer from some potential forms of endogeneity and/or multicollinearity. To check for this, we have computed variance inflation factors (VIFs). The VIFs of our variables are below 10, which is a usual threshold to determine whether there is multicollinearity concern. Thus, we can reasonably assume that we are not exposed to multicollinearity problems. This result is available upon request.

We have tested that the difference between the two estimated coefficients of XCash _i,t  × IVA _i,t is not statistically different from zero. This result is available upon request.

For the sake of brevity, we did not report alternative estimations of our instrumental variables regressions. For instance, we have re-estimated our regressions, using the actual level of cash holdings instead of excess cash, or restricting our sample to the top quartile of the population by excess cash. Results of these estimations are similar of those reported in Table 7. These results are available upon request.

Djankov et al. (2008) explain that “both the original and the revised anti-director rights indices summarize the protection of minority shareholders in the corporate decision-making process, including the right to vote. The index covers the following six areas: (1) vote by mail; (2) obstacles to the actual exercise of the right to vote (i.e., the requirement that shares be deposited before the shareholders’ meeting); (3) minority representation on the board of directors through cumulative voting or proportional representation; (4) an oppressed minority mechanism to seek redress in case of expropriation; (5) preemptive rights to subscribe to new securities issued by the company; and (6) the right to call a special shareholder meeting.”

Djankov et al. (2008) argues that “earlier index of anti-director rights (La Porta et al. 1997, 1998) is based on an ad hoc collection of variables meant to capture the stance of corporate law toward shareholder protection. The present index addresses the ways in which the law deals with corporate self-dealing in a more theoretically grounded way.”

For the methodology see Kaufmann et al. (2010).