Local boy does good: The effect of CSR activities on firm value

Lei, Zicheng; Petmezas, Dimitris; Rau, P. Raghavendra; Yang, Chen

Abstract

We examine the relation between home CEOs and corporate social responsibility (CSR). Our analysis shows home CEOs are associated with higher CSR engagement and increased firm value. These firms exhibit higher asset turnover, lower cost of equity, improved productivity, sales, and profit margins. Home CEOs focus more on community, environmental, and employee-related CSR, and are linked to reduced carbon emissions. This relationship is stronger in firms with higher local business concentration and investor monitoring. Firms led by home CEOs earn higher returns during recent crises. Our results suggest the value increase is not primarily due to agency effects and remain robust to endogeneity concerns. The study indicates a CEO's community connection may influence CSR effectiveness, suggesting that mere CSR engagement may not suffice to boost trust and value. These results highlight the potential importance of local ties in corporate leadership and CSR strategy.

Citation

Lei, Z., Petmezas, D., Rau, P. R., & Yang, C. (online). Local boy does good: The effect of CSR activities on firm value. Journal of Banking and Finance, https://doi.org/10.1016/j.jbankfin.2025.107398

• Journal Article Type: Article
• Acceptance Date: Jan 29, 2025
• Online Publication Date: Jan 31, 2025
• Deposit Date: Jan 30, 2025
• Publicly Available Date: Jan 31, 2025
• Journal: Journal of Banking and Finance
• Print ISSN: 0378-4266
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• DOI: https://doi.org/10.1016/j.jbankfin.2025.107398
• Public URL: https://durham-repository.worktribe.com/output/3357488