CEO Charity Involvement and Corporate Performance in Promoting Stakeholders' Interest

This paper examines whether CEOs of S&P 1500 firms who are involved with charity outside of their daily jobs are more committed to advancing the interests of various stakeholders. We show that firms led by CEOs with charity involvement are associated with higher corporate socially responsible (CSR) performance. Furthermore, these CEOs consistently influence other corporate matters to enhance the interests of stakeholders. More specifically, we find that firms led by CEOs with charity involvement are less likely to be involved in financial misreporting, and that these CEOs provide higher-quality management forecasts about their firms' future performance. We also demonstrate that firms with an imminent need to improve CSR performance or reporting quality have a greater incentive to appoint CEOs involved in charity. A battery of tests show that our findings are related to the prosocial identity of these CEOs rather than to strategic firm-level motivations or CEOs' desire to advance their social status. Overall, CEOs who engage with charitable organizations exhibit consistent prosocial behavior in decision-making.