earticle

영어

We investigate whether the alignment of chief executive officer (CEO) and shareholders wealth influences decisions on engaging in stakeholder-oriented activities. CEOs maximizing their own utility are more likely to engage in such activities when they are not strongly aligned with shareholders wealth. Empirically, firms with CEOs whose wealth is more sensitive to the firm value are less likely to engage in external activities (communities, environments, and human rights). We find that this negative effect is mitigated after the conflict of interests between shareholders and stakeholders is reduced by the constituency statutes. Furthermore, after an exogenous reduction in the alignment of CEO and shareholders wealth, we find that firms that were prone to overinvestment before this exogenous reduction are more likely to engage stakeholder-oriented activities. Overall, our analysis suggests that strong alignment of CEO and shareholders wealth effectively prevents overinvestment in stakeholderoriented activities that might be motivated by agency problems.