Top

Journal of Business Ethics

Published in:

01-06-2012

The Moderating Effects from Corporate Governance Characteristics on the Relationship Between Available Slack and Community-Based Firm Performance

Authors: Jeffrey S. Harrison, Joseph E. Coombs

Published in: Journal of Business Ethics | Issue 4/2012

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

Recent perspectives on community investments suggest that they are opportunities for firms to create value for shareholders and other stakeholders. However, many corporate managers are still influenced by a widely held belief that such investments erode profits and are therefore unjustifiable from an agency perspective. In this paper, we refine and test theory regarding countervailing forces that influence community-based firm performance. We hypothesize that high levels of available slack will be associated with higher community-based performance, but that this relationship will be moderated by three important governance variables: board independence, investment fund ownership, and CEO ownership. We find support for our hypotheses in longitudinal study of a large sample of U.S. corporations.

previous article ‘Psychopaths’ at Work? Implications of Lay Persons’ Use of Labels and Behavioural Criteria for Psychopathy

next article A Global Analysis of Corporate Social Performance: The Effects of Cultural and Geographic Environments

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Agle, B. R., Mitchell, R. K., & Sonnenfeld, J. A. (1999). Who matters to CEOs? An investigation of stakeholder attributes and salience, corporate performance, and CEO values. Academy of Management Journal, 42, 507–525.CrossRef

Aiken, L. S., & West, S. G. (1991). Multiple regression. Newbury Park, CA: Sage Publications.

Barnard, J. W. (1991). Institutional investors and the new corporate governance. North Carolina Law Review, 69, 1135–1187.

Barnea, A., & Rubin, A. (2010). Corporate social responsibility as a conflict between shareholders. Journal of Business Ethics, 97, 71–86.CrossRef

Barringer, B. R., & Harrison, J. S. (2000). Walking a tightrope: Creating value through interorgnizational relationships. Journal of Management, 26, 367–403.CrossRef

Baysinger, B. D., & Butler, H. N. (1985). The role of corporate law in the theory of the firm. Journal of Law and Economics, 28, 179–181.CrossRef

Baysinger, B., & Hoskisson, R. E. (1990). The composition of boards of directors and strategic controls: Effects on corporate strategy. Academy of Management Review, 15, 72–87.

Beatty, R. P., & Zajac, E. (1994). Managerial incentives monitoring, and risk bearing: A study of executive compensation, ownership, and board structure in initial public offerings. Administrative Science Quarterly, 39, 313–335.CrossRef

Benner, M. J., & Tushman, M. (2002). Process management and technological innovation: A longitudinal study of the photography and paint industries. Administrative Science Quarterly, 47, 676–708.CrossRef

Bergh, D. D. (1993). Don’t “waste” your time: The effects of time series errors in management research: The case of ownership concentration and research and development spending. Journal of Management, 19, 897–914.

Berle, A., & Means, G. (1932). The modern corporation and private property. Macmillan: New York.

Berman, S. L., Wicks, A. C., Kotha, S., & Jones, T. M. (1999). Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance. Academy of Management Journal, 42, 488–506.CrossRef

Bogle, J. C. (2005). The battle for the soul of capitalism. New Haven, CT: Yale University Press.

Bourgeois, L. J. (1981). On the measurement of organizational slack. Academy of Management Review, 6, 29–39.

Brammer, S., & Millington, A. I. (2003a). The effect of stakeholder preferences, organizational structure and industry type on corporate community involvement. Journal of Business Ethics, 45(3), 213–226.CrossRef

Brammer, S., & Millington, A. I. (2003b). The evolution of corporate charitable contributions in the UK between 1989 and 1999: Industry structure and stakeholder influences. Business Ethics: A European Review, 12(3), 216–228.CrossRef

Brammer, S. J., Pavelin, S., & Porter, L. A. (2009). Corporate charitable giving, multinational companies and countries of concern. Journal of Management Studies, 46, 575–596.CrossRef

Bromiley, P. (1991). Testing a causal model of corporate risk taking and performance. Academy of Management Journal, 34, 37–59.CrossRef

Bushee, B. J. (1998). The influence of institutional investors on myopic R&D investment behavior. The Accounting Review, 73, 305–333.

Byrne, J. A., L. Brown, & J. Barnathan. (1997). Directors in the hot seat. Business Week, 8(December), p. 100.

Carroll, A. B. (1979). A three dimensional model of corporate performance. Academy of Management Review, 4, 479–505.

Carroll, A. B. (2004). Managing ethically with global stakeholders: A present and future challenge. Academy of Management Executive, 18(2), 114–120.CrossRef

Chaganti, R., & Damanpour, F. (1991). Institutional ownership, capital structure, and firm performance. Strategic Management Journal, 12, 479–491.CrossRef

Chamberlain, G. (1982). Multivariate regression models for panel data. Journal of Econometrics, 18, 5–46.CrossRef

Chatterjee, S., & Harrison, J. S. (2001). Corporate governance. In M. A. Hitt, R. E. Freeman, & J. S. Harrison (Eds.), Blackwell handbook of strategic management (pp. 543–563). Oxford: Blackwell Publishers Ltd.

Cheng, J. L. C., & Kesner, I. F. (1997). Organizational slack and response to environmental shifts: The impact of resource allocation patterns. Journal of Management, 23, 1–18.CrossRef

Choi, J., & Wang, H. (2009). Stakeholder relations and the persistence of corporate financial performance. Strategic Management Journal, 30, 895–907.CrossRef

Cochran, P. L., & Wood, R. A. (1984). Corporate social responsibility and financial performance. Academy of Management Journal, 27, 42–56.CrossRef

Coombs, J. E., & Gilley, K. M. (2005). Corporate social performance as a predictor of CEO compensation: Direct effects and interactions with financial performance. Strategic Management Journal, 26, 827–840.CrossRef

Cyert, R. M., & March, J. G. (1963). A behavioral theory of the firm. Englewood Cliffs: Prentice-Hall.

Daily, C. M., Dalton, D. R., & Cannella, A. A. (2003). Corporate governance: Decades of dialogue and data. Academy of Management Review, 28, 371–382.

Dalton, D. R., Daily, C. M., Certo, S. T., & Roengpitya, R. (2003). Meta-analyses of corporate financial performance and the equity of CEOs, officers, boards of directors, institutions, and blockholders: Fusion or confusion? Academy of Management Journal, 46, 13–26.CrossRef

Dalton, D. R., Daily, C. M., Ellstrand, A. E., & Johnson, J. L. (1998). Meta-analytic reviews of board composition, leadership structure, and financial performance. Strategic Management Journal, 19, 269–290.CrossRef

Dalton, D. R., & Kesner, I. F. (1987). Composition of CEO duality in board of directors: An international perspective. Journal of International Business Studies, 18, 33–42.CrossRef

Davis, G. F., & Stout, S. K. (1992). Organization theory and the market for corporate control: A dynamic analysis of large takeover targets, 1980–1990. Administrative Science Quarterly, 37, 605–633.CrossRef

Demsetz, H., & Lehn, K. (1985). The structure of corporate ownership: Causes and consequences. Journal of Political Economy, 93, 1155–1177.CrossRef

Dittmar, A., & Mahrt-Smith, J. (2007). Corporate governance and the value of cash holdings. Journal of Financial Economics, 83, 599–634.CrossRef

Donaldson, T., & Preston, L. E. (1995). The stakeholder theory of the corporation: Concepts, evidence, and implications. Academy of Management Review, 20, 65–91.

Dunham, L., Freeman, R. E., & Liedtka, J. M. (2006). Enhancing stakeholder practice: A particularized exploration of community. Business Ethics Quarterly, 16, 23–42.

Fama, E. F., & Jensen, M. C. (1983a). Separation of ownership and control. Journal of Law and Economics, 26, 301–325.CrossRef

Fama, E. F., & Jensen, M. C. (1983b). Agency problems and residual claims. Journal of Law and Economics, 26, 327–349.CrossRef

Fombrun, C., & Shanley, M. (1990). What’s in a name? Reputation building and corporate strategy. Academy of Management Journal, 33, 233–258.CrossRef

Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston: Pitman Publishing.

Freeman, R. E., Harrison, J. S., & Wicks, A. C. (2007). Managing for stakeholders: Survival, reputation, and success. New Haven: Yale University Press.

George, G. (2005). Slack resources and the performance of privately held firms. Academy of Management Journal, 48, 661–676.CrossRef

Gilson, R. J., & Kraakman, R. (1991). Reinventing the outside director: An agenda for institutional investors. Stanford Law Review, 43, 863–906.CrossRef

Godfrey, P. C. (2005). The relationship between corporate philanthropy and shareholder wealth: A risk management perspective. Academy of Management Review, 30, 777–798.CrossRef

Graves, S. B., & Waddock, S. A. (1994). Institutional owners and corporate social performance. Academy of Management Journal, 37, 1035–1046.CrossRef

Greene, W. (1995). LIMDEP Version 7.0 User’s Manual. Plainview, NY: Econometric Software.

Griffin, J. J., & Mahon, J. F. (1997). The corporate social performance and corporate financial performance debate: Twenty-five years of incomparable research. Business & Society, 36, 5–31.CrossRef

Grossman, S., & Hart, O. (1982). Corporate financial structure and managerial incentives. In J. J. McCall (Ed.), The economics of information and uncertainty (pp. 107–137). Chicago: University of Chicago Press.

Hair, J., Anderson, R., Tatham, R., & Black, W. (1995). Multivariate data analysis. Upper Saddle River, NJ: Prentice-Hall.

Harris, M., & Raviv, A. (1991). The theory of capital structure. Journal of Finance, 46, 297–355.

Harrison, J. S., & St. John, C. H. (1996). Managing and partnering with external stakeholders. Academy of Management Executive, 10(2), 46–60.CrossRef

Henderson, D. (2001). Misguided virtue: False notions of corporate social responsibility. Wellington: New Zealand Business Roundtable.

Hill, C., & Snell, S. (1988). External control, corporate strategy, and firm performance in research-intensive industries. Strategic Management Journal, 9, 577–590.CrossRef

Hillman, A. J., & Keim, G. D. (2001). Shareholder value, stakeholder management, and social issues: What’s the bottom line? Strategic Management Journal, 22, 125–139.CrossRef

Hillman, A. J., Keim, G. D., & Luce, R. A. (2001). Board composition and stakeholder performance: Do stakeholder directors make a difference? Business & Society, 40, 295–314.CrossRef

Hoskisson, R. E., Hitt, M. A., Johnson, R. A., & Grossman, W. (2002). Conflicting voices: The effects of institutional ownership heterogeneity and internal governance on corporate innovation strategies. Academy of Management Journal, 45, 697–716.CrossRef

Hoskisson, R. E., Hitt, M. A., Johnson, R. A., & Moesel, D. A. (1993). Construct validity of an objective: Entropy categorical measure of diversification strategy. Strategic Management Journal, 14, 215–235.CrossRef

Jensen, M. C. (1986). Agency costs, free cash flow, corporate finance and takeovers. American Economic Review, 76, 323–329.

Jensen, M. (1989). Eclipse of the public corporation. Harvard Business Review, 67(5), 61–74.

Jensen, M. C. (2001). Value maximization, stakeholder theory, and the corporate objective function. Journal of Applied Corporate Finance, 14, 8–21.CrossRef

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.CrossRef

Johnson, R. A., & Greening, D. W. (1999). The effects of corporate governance and institutional ownership types on corporate social performance. Academy of Management Journal, 42, 564–576.CrossRef

Jones, T. M. (1995). Instrumental stakeholder theory: A synthesis of ethics and economics. Academy of Management Review, 20, 404–437.

Jones, T. M., Felps, W., & Bigley, G. A. (2007). Ethical theory and stakeholder-related decisions: The role of stakeholder culture. Academy of Management Review, 32, 137–155.CrossRef

Jones, T., & Wicks, A. (1999). Convergent stakeholder theory. Academy of Management Review, 24, 208–221.

Judge, W., & Zeithaml, C. (1992). Institutional and strategic choice perspectives on board involvement in the strategic decision process. Academy of Management Journal, 35, 766–794.CrossRef

Kacperczyk, A. (2009). With greater power comes greater responsibility? Takeover protection and corporate attention to stakeholders. Strategic Management Journal, 30, 261–285.CrossRef

Kalcheva, I., & Lins, K. V. (2007). International evidence on cash holdings and expected managerial agency problems. Review of Financial Studies, 20, 1087–1112.CrossRef

Karmel, R. S. (2004). Should a duty to the corporation be imposed on institutional shareholders? The Business Lawyer, 60(1), 1–21.

Kassinis, G., & Vafeas, N. (2002). Corporate boards and outside stakeholders as determinants of environmental litigation. Strategic Management Journal, 23, 399–415.CrossRef

Kochhar, R., & David, P. (1996). Institutional investors and firm innovation: A test of competing hypotheses. Strategic Management Journal, 17, 73–84.CrossRef

Mattingly, J. E., & Berman, S. L. (2006). Measurement of corporate social action: discovering taxonomy in the Kinder Lydenburg Domini ratings data. Business and Society, 45, 20–46.CrossRef

Mcguire, J., Dow, S., & Argheyd, K. (2003). CEO incentives and corporate social performance. Journal of Business Ethics, 45, 341–359.CrossRef

McWilliams, A., & Siegel, D. (2001). Corporate social responsibility: A theory of the firm perspective. Academy of Management Review, 26, 117–127.

Miller, D. J. (2006). Technological diversity, related diversification, and firm performance. Strategic Management Journal, 27, 601–619.CrossRef

Milliken, F. J., & Lant, T. K. (1991). The effect of an organization’s recent performance history on strategic persistence and change. In J. E. Dutton (Ed.), Advances in strategic management (Vol. 7, pp. 129–156). Greenwich, CT: JAI Press.

Moskowitz, M. (1972). Choosing socially responsible stocks. Business and Society, 1, 71–75.

Neubaum, D. O., & Zahra, S. A. (2006). Institutional ownership and corporate social performance: The moderating effects of investment horizon, activism, and coordination. Journal of Management, 32, 108–131.CrossRef

Nohria, N., & Gulati, R. (1996). Is slack good or bad for innovation? Academy of Management Journal, 39, 1245–1264.CrossRef

O’Barr, W., & Conley, J. (1992). Fortune and folly: The wealth and power of institutional investing. Homewood, IL: Business One Irwin.

Palmer, T. B., & Wiseman, R. M. (1999). Decoupling risk taking from income stream uncertainty: A holistic model of risk. Strategic Management Journal, 20, 1037–1062.CrossRef

Pfeffer, J., & Salancik, G. (1978). The external control of organizations. New York: Harper & Row.

Pinkowitz, L., Stulz, R., & Williamson, R. (2006). Does the contribution of corporate cash holdings and dividends to firm value depend on governance? A cross-country analysis. Journal of Finance, 61, 2725–2751.CrossRef

Porter, M. E., & M. R. Kramer. (2006). Strategy and society: The link between competitive advantage and corporate social responsibility. Harvard Business Review 80(December), pp. 56–68.

Porter, M. E., & M. R. Kramer. (2011). The big idea: Creating shared value. Harvard Business Review 85(January–February), pp. 62–77.

Preston, L. E., & Sapienza, H. J. (1990). Stakeholder management and corporate performance. Journal of Behavioral Economics, 19, 361–375.CrossRef

Reuer, L., & Leiblein, M. (2000). Downside risk implications of multinationality and international joint ventures. Academy of Management Journal, 43, 203–214.CrossRef

Ruf, B. M., Muralidhar, K., Brown, R. M., Janney, J. J., & Paul, K. (2001). An empirical investigation of the relationship between change in corporate social performance and financial performance: A stakeholder theory perspective. Journal of Business Ethics, 32, 143–156.CrossRef

Schwartz, M. S., & Carroll, A. B. (2003). Corporate social responsibility: A three-domain approach. Business Ethics Quarterly, 13, 503–530.

Sharfman, M. (1996). The construct validity of the Kinder, Lydenberg & Domini social performance ratings data. Journal of Business Ethics, 15, 287–296.CrossRef

Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. Journal of Finance, 52, 737–783.

Singh, J. (1986). Performance slack and risk taking in organizational decision making. Academy of Management Journal, 29, 562–585.CrossRef

Sisodia, R., Wolfe, D. B., & Sheth, J. (2007). Firms of endearment: How world-class companies profit from passion and purpose. Upper Saddle River, NJ: Wharton School Publishing.

Stanwick, P. A., & Stanwick, S. D. (1998). The relationship between corporate social performance and organizational size, financial performance, and environmental performance: An empirical examination. Journal of Business Ethics, 17, 195–204.CrossRef

Starks, L. T. (1987). Performance incentive fees: An agency theoretic perspective. Journal of Financial and Quantitative Analysis, 22, 33–50.CrossRef

Tan, J., & Peng, M. W. (2003). Organizational slack and firm performance during economic transitions: Two studies from an emerging economy. Strategic Management Journal, 24, 1249–1263.CrossRef

Thompson, J. (1967). Organizations in action. New York: McGraw-Hill.

Turban, D. B., & Greening, D. W. (1996). Corporate social performance and organizational attractiveness to prospective employees. Academy of Management Journal, 40, 658–672.CrossRef

US SIF. (2011). Community Investing. http://ussif.org/projects/communityinvesting.cfm, 24 June 2011.

Useem, M. (1996). Shareholder as a strategic asset. California Management Review, 39, 8–27.

Venkatraman, N., & Ramanujam, V. (1986). Measurement of business performance in strategy research: A comparison of approaches. Academy of Management Review, 11, 801–814.

Waddock, S. (2003). Myths and realities of social investing. Organization & Environment, 16, 369–380.CrossRef

Waddock, S., & Graves, S. B. (1997). The corporate social performance-financial performance link. Strategic Management Journal, 18, 303–319.CrossRef

Walsh, J. P., & Seward, J. K. (1990). On the efficiency of internal and external corporate control mechanisms. Academy of Management Review, 15, 421–458.

White, H. (1980). A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica, 48, 817–838.CrossRef

Woolridge, J. M. (2001). Econometric analysis of cross section and panel data. Cambridge, MA: MIT Press.

Zahra, S., & Stanton, W. (1988). The implications of board of directors’ composition for corporate strategy and performance. International Journal of Management, 5, 229–237.

Zappalà, G., & Cronin, C. (2003). The contours of corporate community involvement in Australia’s top companies. Journal of Corporate Citizenship, 12(Winter), 59–73.

Title: The Moderating Effects from Corporate Governance Characteristics on the Relationship Between Available Slack and Community-Based Firm Performance
Authors: Jeffrey S. Harrison
Joseph E. Coombs
Publication date: 01-06-2012
Publisher: Springer Netherlands
Published in: Journal of Business Ethics / Issue 4/2012
Print ISSN: 0167-4544
Electronic ISSN: 1573-0697
DOI: https://doi.org/10.1007/s10551-011-1046-z

Springer Professional

Abstract

Please log in to get access to your license.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Springer Professional "Wirtschaft"

Other articles of this Issue 4/2012

A Global Analysis of Corporate Social Performance: The Effects of Cultural and Geographic Environments

The Cut and Paste Society: Isomorphism in Codes of Ethics

Exploring “Embodied Care” in Relation to Social Sustainability

Transforming Human Resource Management Systems to Cope with Diversity

Firm Networking and Bribery in China: Assessing Some Potential Negative Consequences of Firm Openness

‘Psychopaths’ at Work? Implications of Lay Persons’ Use of Labels and Behavioural Criteria for Psychopathy

Premium Partner