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<p>Empirical research in financial economics has been focused on studying the impact of CEO characteristics on corporate decision-making and performance. This practice overlooks the leadership and organizational research which postulates that for a senior leader to make a strategic change, managers at subordinate levels must support and reinforce such change. We investigate the effect of the top management team (TMT) political heterogeneity on the CEO’s ability to implant her/his ideology onto the firm’s CSR policies. We present evidence that a CEO’s ideology can shape CSR policies only in the existence of a politically homogeneous TMT. This result is robust to the use of the propensity score matching approach to address selection bias, the instrumental variable approach to address endogeneity, and Oster’s test to address omitted variables bias. Further analysis shows that the association between CSR and firm value is contingent on the degree of TMT political heterogeneity. Specifically, shareholders seem to benefit from CSR initiatives only when they receive the full support of both CEOs and members of the TMTs.</p>

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House divided: executive political heterogeneity and corporate social responsibility

  • 期刊论文

  • 发表日期：

    2025年4月22日

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  • Yongdong Wang,
  • Ahmed Elnahas

摘要

Empirical research in financial economics has been focused on studying the impact of CEO characteristics on corporate decision-making and performance. This practice overlooks the leadership and organizational research which postulates that for a senior leader to make a strategic change, managers at subordinate levels must support and reinforce such change. We investigate the effect of the top management team (TMT) political heterogeneity on the CEO’s ability to implant her/his ideology onto the firm’s CSR policies. We present evidence that a CEO’s ideology can shape CSR policies only in the existence of a politically homogeneous TMT. This result is robust to the use of the propensity score matching approach to address selection bias, the instrumental variable approach to address endogeneity, and Oster’s test to address omitted variables bias. Further analysis shows that the association between CSR and firm value is contingent on the degree of TMT political heterogeneity. Specifically, shareholders seem to benefit from CSR initiatives only when they receive the full support of both CEOs and members of the TMTs.