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Can Investors Identify Managerial Discretion in Corporate Social Responsibility Practices? The Moderate Role of Investor Protection
Author(s) -
MartínezFerrero Jennifer,
VillarónPeramato Óscar,
GarcíaSánchez Isabel María
Publication year - 2017
Publication title -
australian accounting review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.551
H-Index - 36
eISSN - 1835-2561
pISSN - 1035-6908
DOI - 10.1111/auar.12138
Subject(s) - dismissal , discretion , business , accounting , corporate social responsibility , investor protection , promotion (chess) , finance , corporate governance , public relations , politics , political science , law
This paper analyses investors’ ability to identify if managers use corporate social responsibility as an entrenchment practice to conceal the risk of dismissal associated with managerial discretion and if this detection is determined by the level of investor protection orientation. Results based on an international database of 1949 companies show that investors and markets do not identify managerial entrenchment based on the promotion of sustainable practices, except when such entrenchment is developed by companies located in countries with strong investor protection. In these countries, investors identify and penalise such companies with lower financial performance.