Market Competition, Managerial Overconfidence, and Corporate Social Responsibility
Advances in Pacific Basin Business, Economics and Finance
ISBN: 978-1-80117-313-1, eISBN: 978-1-80117-312-4
Publication date: 15 March 2022
Abstract
This chapter investigates how market competition relates to firm corporate social responsibility (CSR) investment strategy. Using separate measures to capture different dimensions of competition, we find that firms are likely to invest more (less) in socially responsible initiatives when competition from existing rivals (potential entrants) is high. We also find that industry leaders are more likely to engage in more CSR when higher levels of competition exist, while followers primarily choose to strengthen other aspects of their competitiveness instead. Finally, analyzing the impact of CEO overconfidence on CSR engagement, our study finds novel evidence suggesting that firms with overconfident CEOs tend to underestimate the intensity of competition and are less sensitive to the impact of market competition on CSR engagement, relative to rational CEOs.
Keywords
Citation
Lin, J.J., Werner, E.M. and Huang, Y.-C. (2022), "Market Competition, Managerial Overconfidence, and Corporate Social Responsibility", Lee, C.-F. and Yu, M.-T. (Ed.) Advances in Pacific Basin Business, Economics and Finance (Advances in Pacific Basin Business, Economics and Finance, Vol. 10), Emerald Publishing Limited, Leeds, pp. 1-27. https://doi.org/10.1108/S2514-465020220000010001
Publisher
:Emerald Publishing Limited
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