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CEO Tenure and Corporate Social Responsibility (CSR) Reporting

Long Chen

School of Business George Mason University

4400 University Dr., MS 5F4 Fairfax, Virginia 22030, U.S.A.

lchenk@gmu.edu (703) 993-4532

Chih-Hsien Liao

College of Management National Taiwan University No.85, Sec. 4, Roosevelt Rd.

Taipei, 106, Taiwan chliao105@ntu.edu.tw

(02) 3366-1121

Albert Tsang Schulich School of Business

York University 4700 Keele Street

Toronto, Ontario M3J 1P3, Canada atsang@schulich.yorku.ca

(416) 736-5066

November 6, 2017

ABSTRACT

In this paper, we find a negative association between CEO tenure and CSR reporting. In other words, compared with longer-serving CEOs, CEOs with shorter tenure tend to implement better CSR reporting practices, as measured by greater likelihood of issuing standalone CSR reports, and a higher chance of issuing CSR reports with assurance and in accordance with GRI guidelines. Our cross-sectional analyses further show that the negative association between CEO tenure and CSR reporting is mainly driven by firms with stronger information intermediaries, such as a higher level of media coverage, more analyst following, and greater institutional ownership, and firms with a higher level of discretionary accruals. Additional tests on the signaling effect of CSR reporting confirm that shorter-tenured CEOs tend to more actively signal their future financial performance through CSR reporting than longer-tenured CEOs. Taken together, our results suggest that when the market is highly uncertain about their ability during early years of service, CEOs are more inclined to use CSR reporting as a favorable signal of their ability, especially when signaling through earnings management is constrained and costly. Keywords: Voluntary Disclosure; Standalone CSR Report; Signaling; Earnings Management Data Availability: All data are publicly available from sources identified in the article.

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CEO Tenure and Corporate Social Responsibility (CSR) Reporting

1. Introduction

One of the most notable changes in corporate disclosure practices during the last decade

has been the increasing number of companies that have voluntarily committed to publishing

standalone corporate social responsibility (CSR) reports or augmenting financial disclosure

with non-financial CSR disclosure (KPMG 2011, 2013, 2015; GAI 2015).1 Given the evolving

nature of CSR reporting and the pressing need for academics to understand the economic forces

and executive incentives behind firms’ CSR reporting practices (HBS 2011; Ramanna 2013),

our study examines the role of CEO tenure in firms’ CSR reporting practices. Specifically, we

investigate the relationship between a CEO’s length of service (our proxy for CEO tenure) and

the firm’s commitment to a higher level of CSR reporting.

Our study extends two strands in the current body of research. First, consistent with the

view that shorter-tenured CEOs are more likely to report negative earnings outcomes (Simsek

2007; Antia et al. 2010), prior studies find that when the market is highly uncertain about

CEOs’ ability during their early years of service, CEOs are more likely to adopt strategies such

as accrual earnings management (e.g., Demers and Wang 2010; Huang et al. 2012; Ali and

Zhang 2015) or management guidance (e.g. Dai et al. 2013; Shaikh 2015; Pae et al. 2016)2 to

1 Based on recent evidence from the Governance and Accountability Institute (2015), roughly three-quarters of all S&P 500 firms in the U.S. now publish an annual CSR report. 2 Existing studies suggest that voluntary disclosure of management earnings forecasts can be associated with higher earnings management (e.g., Krishnan et al. 2012).

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favorably influence the market’s perception of their ability. However, signaling firms’ future

financial performance through the window dressing of financial statements may come at a real

cost to CEOs, e.g., being forced out (Hazarika et al. 2012), and thus is unlikely to be an effective

strategy in reducing CEOs’ future career concern. Prior studies provide both analytical finding

(Trueman 1986) and survey evidence (Graham et al. 2005) that managers can signal their type

by committing to voluntary disclosure. Lys et al. (2015) further suggest that committing to a

higher level of voluntary CSR reporting can be an important mechanism to reveal inside

information, such as future financial prospects of the firm.

Second, the accounting literature documents the growing importance of and various

benefits associated with voluntary CSR or environmental reporting for market participants,

such as reducing information asymmetry between firms and investors and protecting firm value

(e.g., Blacconiere and Patten 1994; Dhaliwal et al. 2011, 2012; Matsumura et al. 2014). The

process of preparing and issuing CSR reporting also helps firms to avoid potential corporate

misconduct, or to positively affect investors’ perceptions of management intent even when

high-profile misconduct is observed (Christensen 2016). Along the same lines, recent research

on CSR reporting finds that committing to a higher level of non-financial CSR reporting can

help CEOs to signal their ability to improve future financial performance (Lys et al. 2015) or

to demonstrate their commitment to higher financial transparency (Kim et al. 2012; Chen et al.

2016). However, the motivation behind such voluntary non-financial disclosure, and in

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particular whether CEO’s length of service plays a role in firms’ voluntary CSR reporting

practices, remain less clear.

Motivated by the important roles that voluntary CSR reporting can play in signaling

managers’ private information and firms’ future financial prospects (Lys et al. 2015) as well as

signaling firms’ sustainable/responsible practices (e.g., Simnett et al. 2009; O’Dwyer 2011;

Cohen and Simnett 2015) and building trust (Kanagaretnam et al. 2010; Deng et al. 2013; Hoi

et al. 2013), we posit that compared with longer-tenured CEOs, CEOs in their early years of

service are more inclined to commit to better CSR reporting practices to signal their ability to

the market and build trust between market participants.

Our sample includes 3,380 firm-year observations with available data from Thomson

Reuters’ ASSET4 ESG database from 2002 3 to 2010. Using different proxies for CEOs’

commitment to CSR reporting practices, we find that compared with CEOs in later years of

service, CEOs in their early stages of tenure are more likely to issue standalone CSR reports

voluntarily, to provide independent assurance on their standalone CSR reports, and to prepare

CSR reports in accordance with GRI guidelines, which are perceived as more comprehensive

and of higher quality. To the extent that these characteristics of CSR disclosure capture the

level of CEOs’ commitment to better CSR reporting practices, our findings are consistent with

3 The sample starting year of 2002 is meaningful due to evidence that the adoption of the Sarbanes-Oxley Act of 2002 in the U.S. successfully constrained CEOs’ earnings manipulation activities and increased the cost associated with signaling through earnings manipulation (Aono and Guan 2008; Cohen et al. 2008; Hossain et al. 2011).

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the conjecture that shorter-tenured CEOs are more likely to signal to market participants their

ability to generate future financial performance by committing to better CSR reporting

practices.

In addition, our cross-sectional analyses suggest that the negative association between

CEO tenure and CSR reporting is more pronounced for firms with stronger information

intermediaries as proxied by a higher level of media coverage, more analyst following, and

greater institutional ownership, and firms at a higher level of discretionary accruals. This

additional evidence lends further support to our prediction that CEOs in their early years of

service are more likely to signal their competency to market participants through voluntary

CSR reporting, especially when information intermediaries offer stronger monitoring and

guarantees of the firms’ financial reporting quality or when the firms are constrained in their

ability to manage earnings. To further corroborate our findings, we follow the framework set

forth by Lys et al. (2015) to measure normal and abnormal CSR commitments, which

respectively suggest the investment and signaling roles of CSR commitment, and find that the

positive association between CEOs’ abnormal commitment to CSR reporting (i.e., a signaling

effect) and future financial performance is mainly driven by firms with shorter-tenured CEOs.

Our paper contributes to the literature in several ways. First, prior studies on CEO career

concerns suggest that CEOs’ age and tenure increase their aversion to risk in corporate

investment and financial disclosure decisions, such as investment policies (Serfling 2014),

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earnings forecasts provision (Shaikh 2015), mergers and acquisitions (Yim 2013), issuance of

management earnings guidance (Pae et al. 2016) and communications in conference calls

(Bochkay et al. 2016). However, it still remains unclear whether CEO career concerns could

also affect firms’ voluntary CSR reporting, which has occupied an increasingly important

position in nowadays’ global corporate agenda. Our paper extends the literature on CEO career

concerns by switching the focus from firms’ financial decisions to voluntary CSR disclosure

policy.

Second, although prior management and finance studies (e.g., Hemingway and Maclagan

2004; Manner 2010; Godos-Díez et al. 2011; Giuli and Kostovetsky 2014; Oh et al. 2016)

examine how CEOs’ personal characteristics – such as age, gender, education, personal value,

and political preference – affect CSR, their focus is on firms’ CSR performance as rated by

third-party agencies rather than their voluntary CSR reporting practices. Existing literature

suggests that CSR performance and CSR reporting practices could be resulted by different

incentives.4 Our measures of a variety of CSR reporting characteristics capture the features of

firms’ CSR disclosure policy as well as the credibility of information provided in such reports,

which are of growing importance and relevance to CSR research but lacking in common CSR

performance measures. Therefore, by presenting new evidence on the managerial incentives

4 For example, while previous studies show that firms with better CSR performance are more likely to provide CSR reporting voluntarily (Clarkson et al. 2008; Dhaliwal et al. 2011; Chen et al. 2016), other studies find that firms with poor CSR performance tend to disclose more CSR-related information in response to social and political pressure (Hughes et al. 2001; Patten 2002; Cho et al. 2012).

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behind voluntary CSR disclosures, our study suggests that prior CSR research has provided an

incomplete assessment on the association between CEO characteristics and firms’ CSR practice.

Last, the literature on CSR reporting documents multiple firm-level characteristics as

factors affecting firms’ CSR reporting practices,5 but largely ignores the potential effect of

CEOs’ personal characteristics. Our study fills this gap by examining CEO tenure as an

important personal attribute acting as a previously unidentified determinant of CSR reporting.

To the best of our knowledge, our study is the first to investigate the influence of CEOs’

personal characteristics, and CEO tenure in particular, on firms’ voluntary CSR reporting

practice. In addition, our finding that short-tenured CEOs commit more resources to CSR

reporting adds to the literature on whether CEOs use the flexibility of voluntary disclosure to

“actively” manage investors’ expectations (e.g., Davis and Tama-Sweet 2012; Huang et al.

2014).6

The rest of this paper is organized as follows. Section 2 summarizes the prior literature

and develops hypotheses. Section 3 contains our model specification and variable definition.

Section 4 describes the data and presents summary statistics. Sections 5 and 6 report the main

empirical results and the results of additional tests, respectively. Finally, in Section 7, we

5 Documented firm-level determinants of CSR reporting include firms’ actual CSR performance (Dhaliwal et al. 2011), professional affiliation of CSR report assurers (Pflugrath et al. 2011), existence of sustainability-oriented corporate governance mechanisms (Peters and Romi 2015), firms’ commitment to financial reporting quality (Chen et al. 2016), and family versus non-family firms (Campopiano and Massis 2015). 6 Although Lys et al. (2015) suggest that CSR reporting could play an important signaling role to capital market participants, they acknowledge that their study cannot distinguish between “active signaling” (managers’ CSR reporting choice to convey firms’ future performance) and “passive signaling” (the implications of CSR expenditures for firms’ future performance).

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present our conclusions.

2. Related literature and hypothesis development

2.1 CEO tenure and corporate financial reporting

Studies have suggested that market participants’ uncertainty about CEOs’ ability decreases

with CEO tenure. For example, Gibbons and Murphy (1992) argue that because newly

appointed CEOs lack a past track record of performance, market participants generally have

higher uncertainty about their ability. As CEOs spend more years in office, uncertainty about

their actions, strategies, and ability is reduced, due to the greater observability of their actions

and the accumulation of private knowledge by outsiders (Pan et al. 2015; Bochkay et al. 2016).

Therefore, the incentive of CEOs to signal their ability declines with their length of service as

CEOs.

Consistent with this view, the literature documents that tenure- and age-based differences

between CEOs have important implications for firms’ financial reporting practices. For

example, Huang et al. (2012) find that firms with older CEOs are associated with fewer

financial restatements and a lower tendency to meet or beat analyst forecasts – proxies for

higher quality financial reporting. Similarly, Pae et al. (2016) show that short-tenured CEOs

are more likely to provide management forecast guidance to increase the likelihood of meeting

or beating stock market expectations. Along the same lines, Ali and Zhang (2015) show that

shorter-tenured CEOs tend to adopt more aggressive financial reporting practices through

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earnings overstatement. A key argument underlying these studies is that by adopting more

aggressive financial reporting practices (e.g., reporting an overstated earnings outcome

achieved by earnings manipulation) or by guiding earnings expectation, CEOs can favorably

affect market participants’ assessment of their ability to generate good future financial

performance, which can in turn lead to long-term benefits to the CEOs, such as lower future

career concern, better reputation, and higher future compensation (Fama 1980; Hermalin and

Weisbach 1998).

However, a number of concerns can be raised to challenge such inferences. First, although

research (Warner et al. 1988; Parrino 1997; Allgood and Farrell 2000) has documented a

negative relation between firm performance and the probability of CEO turnover, which

supports CEOs’ incentive to avoid reporting unfavorable earnings outcomes through aggressive

financial reporting practices, a more recent study by Hazarika et al. (2012) finds that a firm’s

earnings management per se is positively associated with the likelihood and speed of forced

CEO turnover. This finding challenges the view that reporting more favorable earnings figures

through aggressive financial reporting practices effectively reduces CEOs’ future career

concern.7

Second, the intensified scrutiny of corporate financial reporting quality after the passage

7 Similar to earnings manipulation, CEOs’ manipulation of their job qualifications may also not be an effective way to reduce CEOs' career concern. An anecdotal example is Scott Thompson, the former Yahoo CEO, who paid high price for his overstated qualification on his Bio. See for example, https://www.forbes.com/sites/deborahljacobs/2012/05/14/the-high-price-of-career-lies-2/#76d9c90ad91d.

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of the Sarbanes-Oxley (SOX) Act of 2002 complicates the view that CEOs, especially those in

their early years of service, are inclined to report better financial outcomes through earnings

manipulation. Supporting this claim, research has found that managers switched after SOX

from accrual-based earnings management to real activity manipulation, i.e., activities with the

potential to have a significantly negative impact on future operating performance, to meet

market participants’ earnings expectations (Graham et al. 2005; Cohen et al. 2008). These

studies challenge the view that reporting more favorable earnings figures through aggressive

financial reporting practices is a cost-efficient strategy in reducing CEOs’ future career concern,

especially during the post-SOX period. In addition, in their survey study of more than 400

executives in the U.S., Graham et al. (2005) also present evidence suggesting that stakeholder

motivation, i.e., CEOs’ motivation to enhance their reputation with stakeholders such as

customers and suppliers, is especially important for firms with young CEOs. This evidence

provides preliminary support to our prediction of a negative relation between CEO tenure and

voluntary CSR reporting.

Third, anecdotal evidence suggests that one of the most important factors in CEOs’

attempts at building trust and increasing their reputation is to exhibit highly ethical behavior

and communicate with market participants in a more transparent manner. 8 Using an

8 See the annual study on global trust and credibility conducted by the Edelman Trust Barometer in 2014, available at http://www.edelman.com/assets/uploads/2016/01/2016-Edelman-Trust-Barometer-Global-_-Leadership-in-a-Divided-World.pdf.

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experimental setting, Kanagaretnam et al. (2010) present supporting evidence that provision of

transparent information plays an important role in building investors’ trust. More related to our

study, Elliott et al. (2014) find in another experimental setting that investors’ estimates of

fundamental value are positively affected by positive CSR performance information. Following

these studies, if CEOs in their early years of service have a greater incentive to build their

credibility and favorably influence the market’s assessment of their ability, another conjecture

is that they could be more likely to provide more transparent information through voluntary

CSR reporting.

2.2 CEO tenure and CSR reporting – signaling incentive

Lys et al. (2015) argue that voluntary disclosure is a necessary element of signaling.

Specifically, they find a positive relation between commitment to a higher level of CSR

reporting in the current period and firms’ future financial performance, after controlling for

other ways in which firms may signal their future prospects (e.g., changes in dividend payments,

issuance of management forecasts, and direction of management forecast surprises). As such,

their finding suggests that CSR reporting may serve as an important mechanism in signaling

firms’ future financial performance. This finding is consistent with previous studies’ conclusion

that CSR reporting is a valuable way for CEOs to signal their trustworthiness and communicate

private information about firms’ future prospects to investors, which in turn may bring benefits

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to both firms and their CEOs (e.g., Hoi et al. 2013; Deng et al. 2013; Chen et al. 2016).9 Based

on the potentially positive role of CSR reporting in achieving such goals, we posit that to the

extent that CEOs with shorter tenure have a higher incentive to build their reputation and signal

their ability, shorter-tenured CEOs are more likely to commit to a higher level of CSR reporting.

2.3 CEO tenure and CSR reporting – other incentives

There are several other reasons to predict a negative relation between CEO tenure and CSR

reporting. First, from the cost perspective, although studies have suggested that both CSR

reporting and overstated financial outcomes through earnings manipulation can favorably

influence market participants’ perception of CEOs’ ability, unlike CSR reporting, earnings

manipulation may come with significant costs to CEOs and consequently fail to reduce CEOs’

future career concern (Hazarika et al. 2012). However, a corporate image of social

responsibility can bring various benefits to firms and CEOs through direct and indirect channels

(Lys et al. 2015). Consistent with this view, Peloza (2006) argues that CSR could act as a form

of reputation insurance.10 Together, these discussions suggest that committing to better CSR

disclosure practices may be a rational and cost-effective strategy to reduce CEOs’ future career

concern.

9 Extant research suggests that CEOs can also signal their future financial performance through voluntary financial disclosure, such as issuing management earnings forecasts. However, the findings on the relation between CEO tenure and issuance of management forecasts are mixed. For example, while Shaikh (2015) finds a negative relation between CEO career concerns and the likelihood of issuing management forecasts, Dai et al. (2013) find a positive relation between CEO tenure and the issuance of management forecasts. 10 Anecdotal evidence also suggests the importance of CSR in building trust (see, for example, the 2016 PwC Global CEO Survey, available at http://www.pwc.com/gx/en/ceo-survey/2016/landing-page/pwc-19th-annual-global-ceo-survey.pdf).

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Second, from the returns perspective, CSR is generally viewed as a long-term investment

(Orlitzky et al. 2003), and thus any potential returns associated with CSR commitments are

unlikely to be evident within a short period (Oh et al. 2016). As a result, due to the long-term

nature of CSR investment, CEOs with a short career horizon (i.e., CEOs with longer tenure)

are less likely to commit to such actions (Matta and Beamish 2008). This argument again

predicts a negative relation between CEO tenure and CSR reporting.

Finally, from the external pressure perspective, when the strategies or structures of firms

deviate from the requirements of the environment, CEOs may face external pressures; longer-

tenured CEOs, who have greater power than shorter-tenured CEOs, tend to be more able to

resist such external pressures (Miller 1991). In recent years, the increased demand for CSR,

including more transparent CSR disclosure to stakeholders, has become a new requirement of

the environment. Thus, following Miller (1991), we predict that CEOs with shorter tenure, who

presumably are less able to resist external pressure on CSR reporting are more likely to respond

to this external pressure by voluntarily committing to higher levels of CSR reporting.

Following these arguments, we state our first hypothesis as follows.

Hypothesis 1: There is a negative relation between CEO tenure and CSR reporting.

Other studies argue that newer CEOs tend to be more risk-averse (Hirshleifer and Thakor

1992) and more likely to adopt conservative investment policies before they are perceived by

the market as high quality managers (Serfling 2014). Thus, CEOs with shorter tenure may be

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less likely to commit resources to CSR investments, which come with greater outcome

uncertainty (Orlitzky et al. 2003). In addition, a recent study by Hubbard et al. (2017) shows

that while greater past CSR investment helps shield the CEOs of firms with good financial

performance from dismissal, it exposes CEOs of firms with poor financial performance to a

greater risk of dismissal. In other words, to the extent that shorter-tenured CEOs are more likely

to have poor financial performance, committing higher resources to CSR may expose these

CEOs to an even greater career risk. These counterarguments could predict a positive relation

between CEO tenure and CSR reporting, which adds tension to our prediction of a negative

relation between the two.

2.4 Cross-sectional variation in the relation between CEO tenure and CSR reporting

2.4.1 External monitoring through information intermediaries

The corporate governance literature suggests that information intermediaries such as news

media, financial analysts, and institutional investors serve as effective external monitors on

firms’ financial reporting quality. First, it is well documented that the media play an important

role as information intermediaries in the stock market, reducing the cost of collecting and

evaluating information for investors (Griffin et al. 2011; Dougal et al. 2012; Kim et al. 2014).

Studies have found that media coverage not only improves a firm’s information environment

and reduces the cost of capital (e.g., Fang and Peress 2009; Bushee et al. 2010; Drake et al.

2015), but also can discipline managers’ behavior through information discovering and

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broadcasting (Dyck and Zingales 2002, 2004). Consistent with this view, studies have found

that financial media play an important role in detecting fraud (Miller 2006; Dyck et al. 2010)

and lowering insider trading profits (Dai et al. 2015). Therefore, to the extent that greater media

coverage plays a role of corporate governance, higher media coverage can potentially constrain

CEOs’ flexibility in accounting, which in turn increases the cost of influencing market

participants’ perception through earnings manipulation. Following this argument, we predict

that CEO tenure has a more salient effect on CSR reporting in the presence of higher media

coverage.

Second, previous studies find consistent evidence supporting the positive role analysts play

in the capital market. Specifically, studies conducted in both the U.S. and international settings

show that firms followed by a greater number of financial analysts manage their earnings less

and thus provide higher-quality financial information (e.g., Yu 2008; Degeorge et al. 2013). To

the extent that higher analyst following serves as an additional barrier reducing CEOs’

incentives for earnings manipulation, we predict that CEOs with a greater need to influence

market perception of their ability, i.e., shorter-tenured CEOs are more inclined to adopt CSR

reporting practices as a signaling mechanism when analyst following is higher.

Lastly, the literature suggests that institutional investors tend to hold large equity stakes

and possess high levels of sophistication, giving them the incentive and ability to reduce agency

cost and information symmetry between managers and shareholders (Shleifer and Vishny 1986).

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To the extent that institutional investors reduce information asymmetry by making it more

difficult for firms to overstate financial outcomes (Ajinkya et al. 2005; Velury and Jenkins 2006;

Chen et al. 2007; Ferreira and Matos 2008; Aggarwal et al. 2011; Boone and White 2015), we

expect the negative effect of CEO tenure on CSR disclosure to be more prominent in firms with

high institutional ownership.

Taken together, these considerations lead to the following hypothesis.

Hypothesis 2: The negative association between CEO tenure and CSR reporting is more pronounced for firms with stronger information intermediaries (e.g., a higher level of media coverage, higher analyst following, and a higher level of institutional ownership).

2.4.2 Internal flexibility to manage earnings

Given a certain level of external monitoring, CEOs’ ability to optimistically bias earnings

may also decrease with the extent to which earnings are already overstated. The reversing

nature of accrual accounting suggests that when the level of earnings management in the

current period is high, CEOs’ ability or flexibility to manage earnings in the future periods will

be constrained (Barton and Simko 2002). Based on this argument, we predict that shorter-

tenured CEOs’ incentive to issue CSR reports is stronger when their ability to manage earnings,

as an alternative signaling tool, is constrained by the existing level of accrual manipulation.

This leads to our last hypothesis:

Hypothesis 3: The negative association between CEO tenure and CSR reporting is more pronounced for firms with a higher level of discretionary accruals.

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3. Research design

To test whether CEO tenure is related to CSR reporting, we use the following model:

CSR = α0 + α1TENURE + α2CSRPERF + α3ATO + α4PM + α5CASH + α6CFO + α7LEVERAGE + α8MTB + α9SIZE + α10RND + α11ADVERTISIG + α12LITIGATION + α13CORPGOV + α15POORPERF + α16LEGALCASE + α17CSRBOARD + Industry Indicators + Year Indicators + ε (1)

The dependent variable, CSR reporting (i.e., CSR), is measured in three different ways: (1)

CSRREPORT, an indicator variable equal to one if the firm produces a standalone CSR report

and zero otherwise (Dhaliwal et al. 2011); (2) CSRAUDIT, an indicator variable equal to one

if the firm provides assurance on its CSR report and zero otherwise (Pflugrath et al. 2011); and

(3) CSRGRI, an indicator variable equal to one if the firm issues a CSR report that follows GRI

guidelines and zero otherwise (Willis 2003). As CSR reporting may have an important

signaling effect on firms’ future financial performance, and as CEOs normally have substantial

freedom in preparing and issuing CSR disclosures, we believe our use of multiple measures of

CSR disclosure provides an opportunity to better investigate the incentives for CEOs to use

CSR disclosure to signal their ability to market participants.

Our main variable of interest, TENURE, is defined as the number of years a CEO has held

the chief executive position. As CEO tenure may not affect CSR reporting activities

monotonically, we also modify Model (1) by replacing TENURE with LTENCEO, an indicator

variable equal to one if the tenure of a CEO is more than ten years (i.e., about the top 30% of

all CEOs in our sample) and zero otherwise. We expect both TENURE and LTENCEO to have

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a negative association with each of the three dependent variables (CSRREPORT, CSRAUDIT,

and CSRGRI).

We include several control variables in the regression. CSRPERF is used to control for

CSR performance, as firms with better social performance have a greater incentive to disclose

CSR activities (Dye 1985). CSRPERF is defined as the sum of net scores from KLD’s six

categories (community, diversity, employee relations, environment, human rights, and product),

where the net score is calculated as the sum of strengths divided by the number of strength

items minus the sum of concerns divided by the number of concern items.11

We add the remaining explanatory variables following Lys et al. (2015) to control for firm-

level economic determinants of CSR investments or commitment to CSR reporting. Asset

turnover, ATO, is defined as net sales divided by year-end total assets. Profit margin, PM, is

measured by income before extraordinary items divided by net sales. CASH is defined as cash

scaled by total assets. CFO is cash flow from operations divided by total assets. LEVERAGE

is the sum of long-term debt and debt in current liabilities divided by total assets. MTB is

defined as the sum of market value of equity, long-term debt, debt in current liabilities,

liquidation value of preferred stock, and deferred taxes and investment credit divided by total

assets. SIZE is measured as the natural logarithm of total assets. RND is research and

11 KLD defines a set of strengths and concerns under each category, and assigns a value of 1 if a strength or concern exists and a value of 0 otherwise. As the number of strength or concern items varies considerably across years, we follow prior studies (e.g., Deng et al. 2013) by dividing the strength (concern) scores in each dimension by the respective number of strength (concern) items.

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development expenses scaled by net sales. ADVERTISING is advertising expenses scaled by

net sales. LITIGATION is an indicator variable that equals one if the firm operates in a high-

litigation industry (SIC codes 2833-2836, 3570-3577, 3600-3674, 5200-5961, 7370-7374, and

8731-8734) as identified by Francis et al. (1994), and zero otherwise. CORPGOV is the

corporate governance score from the ASSET4 ESG database.

In addition, to the extent that CEO tenure could be stopped by organizational crises (Fee

et al. 2013) while at the same time CSR reporting could help firms recover from crises

(Christensen 2016), it could be possible that prior period underperformance or misconduct

explain at least part of the CSR reporting under the new CEO. To control for such confounding

events of organizational crises, we include two additional variables: POORPERF, an indicator

variable equal to 1 if the firm’s ROA is in the bottom quintile within its industry, and 0

otherwise; and LEGALCASE, defined as natural logarithm of the number of lawsuit cases filed

against the firm in the last two years. Furthermore, to control for the board’s preference for

CSR practices, i.e., the effect of existence of sustainability-oriented corporate governance

mechanism on CSR reporting (Peters and Romi 2015), we control for CSRBOARD, i.e., an

indicator variable equal to 1 if the firm has established a CSR-related board committee in the

prior year, and 0 otherwise. Finally, we include industry and year fixed effects and cluster

robust standard errors by industry and year. We include detailed variable definitions in

Appendix A.

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4. Data and sample

4.1 Data

We obtain proxies for CSR reporting policy (CSRREPORT, CSRAUDIT, and CSRGRI)

from the Thomson Reuters ASSET4 ESG database, which provides CSR data since 2002 for

Russell 1000 index firms.12 In addition, based on the data provided by ASSET4, we further

create an aggregated CSR reporting score measure CSRSCORE, which equals the average value

of ENSCORE and SOSCORE.13 However, CSRSCORE could be a noisy measure of firms’

CSR reporting policy since ASSET4 ESG data include not only items reported or claimed by

managers (i.e., CSR reporting) but also those reflecting CSR performance. We then only keep

items that are either reported or claimed by managers and refine ASSET4 ESG data’s social

and environment CSR components as SO_INFO and EN_INFO, respectively. Correspondingly,

we define the refined aggregated CSR reporting measure, CSR_INFO as the average value of

SO_INFO and EN_INFO. We use the refined measure, CSR_INFO, as a supplemental proxy

for CSR reporting, and use the raw measure, CSRSCORE to estimate optimal and deviated CSR

reporting following Lys et al. (2015).

12 ASSET4 collects CSR data on more than 900 evaluation points per firm and scores firms on financial, environmental, social, and governance dimensions based on objective, publicly available information (e.g., stock exchange filings, annual financial and sustainability reports, nongovernmental organizations’ websites, and news sources). 13 As the financial dimension of ASSET4 ESG data focuses more on the firm’s shareholders rather than society in general and the governance dimension is often perceived as a distinct construct from the environmental and social pillars (Lys et al. 2015), we exclude the financial and governance dimensions of ASSET4 ESG data and include only the environmental (ENSCORE) and social scores (SOSCORE) in calculating CSRSCORE. We present detailed ASSET4 data categories of environmental and social components in Appendix B.

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To control for the effect of CSR performance on CSR reporting, we include the widely

used CSR performance rating data from the KLD STATS database.14 In addition, we collect

CEO tenure data from ExecuComp, financial data from Compustat, media coverage data from

RavenPack, analyst forecast data from IBES, institutional ownership data from the Thomson

Reuters 13-f database, and corporate governance data from ASSET4 ESG.

4.2 Sample and descriptive statistics

We start our sample construction with all U.S. firms covered by the ASSET4 database

from 2002 to 2010 (6,180 observations). We then merge the ASSET4 data with ExecuComp,

and restrict our sample based on the availability of CEO data, a procedure yielding 4,721 firm-

year observations. Finally, we delete observations with missing data for financial and other

control variables and obtain a final sample consisting of 3,380 observations. The by-year

sample distribution is reported in Panel A of Table 1. Consistent with prior studies, Table 1

reveals the substantially increasing trend of CSR reporting over time. An industry breakdown

(untabulated) shows that our sample encompasses a broad cross-section of industries.

Table 1, Panel B reports that out of the 3,380 firm-year observations in the full sample,

792 firms (23%) issued CSR reports in the given year, among which 15% provide assured CSR

reports and 62% publish CSR reports in accordance with GRI guidelines. The mean (median)

14 Our main results remain qualitatively unchanged when we replace KLD’s CSR performance measure with ASSET4 ESG’s CSR performance component, i.e., the average score of all items not included in the CSR_INFO measure.

22

CEO tenure is 8.31 (6.92) years and longer-tenured CEOs (i.e., CEO tenure > 10 years) account

for about 30% of the sample. Moreover, firms in our sample are generally large (mean total

assets = $7,405.7M) and profitable (mean profit margin = 6%) and have good corporate

governance (mean corporate governance score = 0.76). On average, few (2% for each) sample

firms experienced poor financial performance or have established a CSR-related board

committee prior to the given year, and about 4.2 lawsuit cases were filed against an average

sample firm within two years prior to the given year.

[Insert Table 1 about Here]

Table 2 summarizes three CSR reporting variables across CEOs in two different tenure

groups. The results indicate that compared with shorter-tenured CEOs, CEOs with longer

tenure tend to issue significantly fewer standalone CSR reports (mean CSRREPORT: 0.17 vs.

0.26) and are also less likely to provide CSR reports with external assurance (mean CSRAUDIT:

0.07 vs. 0.17) or follow GRI guidelines in CSR reporting (mean CSRGRI: 0.52 vs. 0.64). These

univariate tests provide preliminary evidence that CEOs with shorter tenure are more likely

than CEOs with longer tenure to commit to better CSR reporting practices.

[Insert Table 2 about Here]

Table 3 presents the correlation matrix of the main test variables. The table shows that

TENURE has significant and negative correlations with all the three variables of CSR reporting,

i.e., CSRREPORT, CSRAUDIT, and CSRGRI (Spearman correlations: -0.10, -0.12, and -0.10,

23

respectively). Similarly, LTENCEO also has significantly negative correlations with all of the

CSR reporting variables. These results are consistent with the prediction that longer-tenured

CEOs have less incentive to signal their ability through providing CSR-related disclosures.

Correlations of other control variables with CSR reporting variables are generally consistent

with prior research (e.g., Lys et al. 2015).

[Insert Table 3 about Here]

5. Empirical results

5.1 CEO tenure and CSR reporting

Table 4 reports regression results for the effect of CEO tenure on CSR reporting, where

CEO tenure is measured by both a continuous (TENURE) and an indicator variable (LTENCEO)

and CSR reporting is proxied by characteristics of CSR reporting (Panel A) or refined

aggregated CSR reporting scores (Panel B), respectively. In Panel A, we present results on

three measures of CSR reporting characteristics, i.e., issuance of a standalone CSR report,

CSRREPORT (Columns 1-2), issuance of a standalone CSR report with third-party assurance,

CSRAUDIT (Columns 3-4), and issuance of a standalone CSR report following GRI guidelines,

CSRGRI (Columns 5-6). As Panel A results report, the relation between CEO tenure and CSR

reporting is consistently negative and significant across both definitions of CEO tenure and all

measures of CSR reporting characteristics. These results suggest that longer-tenured CEOs are

in general less likely to issue standalone CSR reports, provide assurance for CSR reports, or

24

issue CSR reports in accordance with GRI guidelines, which lend strong support for our

Hypothesis 1.

In Panel B, we use the refined ASSET4 CSR scores (i.e., CSR_INFO, EN_INFO, and

SO_INFO) as alternative measures of CSR reporting. As discussed in section 4.1, these refined

CSR scores are counted by only keeping environmental and social components that are reported

or claimed by the firms, and thus are a pure measure of the level of CSR reporting. Columns

1-2 show that the effect of CEO tenure on refined CSR reporting score is negative and

significant (TENURE: coefficient = -0.005, t-stat = -2.26; LTENCEO: coefficient = -0.016, t-

stat = -5.28), which again supports our main hypothesis that CEOs with longer tenure are less

likely to dedicate effort to CSR reporting practices. Next, we replace the overall refined CSR

reporting score with refined environmental reporting scores (Columns 3-4) and refined social

reporting scores (Columns 5-6) and continue to find consistent results, i.e., longer-tenured

CEOs have lower CSR reporting scores in both the environmental and social dimensions.

[Insert Table 4 about Here]

5.2 Cross-sectional analyses—information intermediaries

To better understand the mechanism that may influence CEOs’ CSR investment or

reporting incentives, we next explore the effect of information intermediaries on cross-

sectional variation in the relationship between CEO tenure and CSR reporting variables.

5.2.1 Effect of media coverage

25

We first examine media coverage as an information intermediary using data obtained from

RavenPack, a news analytics company. If earnings management and CSR reporting can both

serve as vehicles used by younger CEOs to signal firms’ future financial performance (Ali and

Zhang 2015; Lys et al. 2015), we predict that younger CEOs are more likely to adopt CSR

reporting for such signaling purpose when the room for further earnings manipulation is limited

by a higher level of media coverage.

As larger firms tend to receive more media coverage, we deflate the total amount of media

coverage by firm size. To explore the possible moderating effect of media coverage, we define

HIGHMEDIA as an indicator variable equal to 1 if the firm’s media coverage is above the

industry median, and 0 otherwise, and interact HIGHMEDIA with CEO tenure variables. As

Panel A of Table 5 shows, the coefficient on the interaction term is negative and significant

across all the six columns, which suggests that the role of media coverage as an information

intermediary in monitoring financial reporting quality strengthens the incentive for shorter-

tenured CEOs to commit to more CSR reporting, and thus supports Hypothesis 2.

[Insert Table 5, Panel A about Here]

5.2.2 Effect of analyst coverage

We next examine the moderating effect of analyst coverage as another information

intermediary on the relation between CEO tenure and CSR reporting. Panel B of Table 5

presents the results of re-estimating model (1) after controlling for HIGHANCOV (i.e., an

26

indicator variable equal to 1 if the firm’s analyst coverage is above the industry median, and 0

otherwise) and its interaction term with CEO tenure variables. Similar to Panel A of Table 5,

we find a negative and significant coefficient on TENURE (LTENCEO) × HIGHANCOV,

which lends further support to Hypothesis 2. This finding suggests that analysts play a

monitoring and information intermediary role similar to media coverage. That is, more

coverage by media or analysts increases the incentives for shorter-tenured CEOs to signal

future financial performance through more CSR disclosures.

[Insert Table 5, Panel B about Here]

5.2.3 Effect of institutional ownership

To examine institutional ownership as a third measure of information intermediaries, we

obtain data from the Thomson Reuters 13-f database. As in the previous analyses, we define

an indicator variable HIGHINST, which equals 1 if the firm’s institutional ownership is above

the industry median, and 0 otherwise, and add this indicator variable as well as its interaction

term with CEO tenure variables in model (1). These results are summarized in Table 5, Panel

C.

We find that the negative effect of CEO tenure on CSR reporting is significantly stronger

in the presence of high institutional ownership, and the result holds across all the six columns.

This finding is consistent with the conjecture that higher ownership by institutional investors

works as another effective information intermediary to help restrict earnings management, thus

27

increasing the need and incentive for new CEOs to signal future financial performance to the

market through CSR reporting, and our hypothesis 2 is again supported.

[Insert Table 5, Panel C about Here]

5.3 Cross-sectional analyses—discretionary accruals

To test the potential moderating effect of discretionary accruals on a CEO’s decision to

commit to CSR reporting in the presence of career concerns, we modify model (1) by adding

the measure of accrual-based earnings management (ABS_DA) as adopted by Kim et al. (2012)

and interacting ABS_DA with CEO tenure variables. In addition, since CEOs’ choice of accrual-

based earnings management is necessarily related with their choice of earnings management

through real activities, we also control for real earnings management (RM) and its interaction

term with TENURE/LTENCEO. With this model, we intend to examine whether the

relationship between CEO tenure and CSR reporting varies cross-sectionally across firms with

different levels of earning management.

We do not have predicted signs on the main effect of earnings management measures in

the modified model (1) since research examining the relation between earnings quality and

CSR reporting/CSR performance has found mixed results. Financial reporting quality can be

positively related with CSR initiatives, suggesting CEOs’ ethical obligations (Kim et al. 2012;

Christensen 2016) and/or the complementary relationship between financial reporting quality

and CSR reporting (Chen et al. 2016). However, the relation between financial reporting quality

28

and CSR can also be negative when CEOs’ incentives for CSR derive from impression

management and reputation insurance (Hemingway and Maclagan 2004; Prior et al. 2008).

As reported in Table 6, our main finding on the negative relation between CEO tenure and

CSR reporting remains qualitatively unchanged (except for one of the two CEO tenure

measures in testing CSRREPORT and CSRAUDIT, where the relation becomes insignificant)

after controlling for both accrual-based and real earnings management and their interactions

with CEO tenure. The coefficient on ABS_DA is positive and significant in three out of six

columns, suggesting that the CEOs of our sample firms may be inclined to adopt both

discretionary accruals and CSR reporting for performance signaling purpose.

In addition, we find a negative and significant coefficient on TENURE

(LTENCEO)×ABS_DA in all the six columns. This result is consistent with the conjecture that

CEOs with career concerns may be constrained in their ability to further manage earnings by

the level of current period discretionary accruals, and thus are more likely to adopt CSR

reporting as an alternative tool of performance signaling; and our Hypothesis 3 is supported.

[Insert Table 6 about Here]

6. Additional analyses

6.1 The signaling effect of CSR reporting on future financial performance

Although the finding of a negative association between CEO tenure and CSR reporting

suggests that compared with longer-serving CEOs, CEOs with shorter tenure tend to implement

29

better CSR reporting practices, the underlying mechanism of this finding is unclear. Possible

alternative explanations to the performance signaling story include: longer-serving CEOs could

be less responsive to stakeholders’ demand; shorter-tenured CEOs are more inclined to use

CSR reporting for ‘green-washing’; or firms with shorter-tenured CEOs are more likely to have

financial slack and thus are more able to commit to CSR investment. To rule out these

alternative explanations and validate our main findings that CEOs with shorter (longer) tenure

take more (fewer) CSR-related initiatives due to the incentives of signaling, we follow Lys et

al. (2015) to test the association of CSR reporting with firms’ future performance and examine

whether this association differs between shorter- and longer-tenured CEOs.

Specifically, Lys et al. (2015) suggest that abnormal levels of CSR expenditure/disclosure

represent a form of signaling, while normal levels serve as an investment to improve future

financial performance. Following their framework, we first conduct a test that regresses a firm’s

investment in CSR reporting (CSRSCORE) on the set of determinants identified in Lys et al.

(2015) and report the results in Appendix C. We next estimate the fitted value and residual term

from the regression as the optimal and abnormal levels of CSR investment, respectively

denoted as OPTIMAL_CSR and DEVIATION. We then regress future financial performance

(either accounting or market measures of future performance) on DEVIATION and

OPTIMAL_CSR after controlling for other determinants of future performance, and summarize

these results in Panel A of Table 7. The focus of our analysis is the coefficient on DEVIATION,

30

which indicates the possible signaling role of CSR reporting.

Columns (1)–(3) in Panel A of Table 7 report the results for the effect of decomposed CSR

scores on future financial performance, measured as changes in ROA from year t to t+1. We

find that in the full sample (Column 1), the coefficient on DEVIATION is significantly positive,

consistent with the signaling hypothesis proposed by Lys et al. (2015). To validate that the

signaling effect differs between CEOs with different tenure, we estimate the same regression

separately for subsamples of shorter-tenured CEOs (CEOs with tenure shorter than or equal to

ten years) and longer-tenured CEOs (CEOs with tenure longer than ten years). As the results

in Columns (2)–(3) suggest, for firms with shorter-tenured CEOs, deviation from optimal CSR

investments is positively and significantly associated with future ROA changes; there is no

such association, however, for firms with longer-tenured CEOs. Columns (4)–(6) reveal

consistent results when future performance is measured as changes in Tobin’s Q (TBQ) from

year t to t+1.

Panel B of Table 7 presents the results for the raw CSR reporting scores. Consistent with

the results for decomposed CSR reporting scores in Panel A, the positive and significant

relation of raw CSR scores with future financial performance holds only for firms with shorter-

tenured CEOs, but not for those with longer-tenured CEOs. Overall, the findings in both panels

of Table 7 support our conjecture that shorter-tenured CEOs are more likely than longer-tenured

CEOs to invest in CSR reporting as a tool to signal future financial performance.

31

[Insert Table 7 about Here]

6.2 Controlling for CEO turnover

Fee et al. (2013) find that 64.35% of a broad sample of CEO turnover events were either

“forced” or “suspected forced” cases that suggest organizational crises. Given that CSR

reporting help firms recover from crises (Christensen 2016), forced CEO turnover (as reflected

in shorter CEO tenure) could confound the interpretation of our main results. In addition, Meng

et al. (2013) find that the corporate environmental responsibility is negatively associated with

the involuntary turnover (such as forced-out and dismissals) and positively associated with

normal turnover (such as retirement and contract expiration), which further challenges whether

our results are driven by forced CEO turnover.

To rule out this concern, we restrict the sample to firms that have no CEO turnover (either

forced or normal) events during the sample period and re-test model (1) on the no-turnover

sample. Results in Table 8 suggest that the negative relation between CEO tenure and CSR

reporting behavior continues to hold in the clean sample free of effect of any CEO turnover.15

[Insert Table 8 about Here]

6.3 Controlling for prior CEO experience

CEOs with proven records at other well-known firms are less incentivized to engage in

15 To control for forced CEO turnover, we are also hand-collecting turnover data using Factiva news article search. Future test of model (1) on the sample of firms without forced CEO turnover could further consolidate our finding in Table 8.

32

the same type of signaling that relatively unknown CEOs would. Therefore, conditional on the

same length of CEO tenure, the lack of prior CEO experience further drives CEOs to signal

their ability through CSR reporting. We test this conjecture by restricting the sample to firms

with shorter-tenured CEOs and introducing an indicator variable, NEWCEO, which equals 1 if

the CEO has no prior CEO experience at other public firms, and 0 otherwise. As Table 9 reports,

the coefficient on NEWCEO is positive and significant in regressions of CSRREPORT and

CSRGRI, which provide some evidence that CEOs lacking prior CEO experience have a larger

career concern and thus are more likely to signal to the market through committing to higher

levels of CSR disclosure.

[Insert Table 9 about Here]

6.4 Using CSR report readability as an alternative measure of CSR report quality

The level of readability of firms’ CSR reports may be an additional measure of CSR

reporting properties (Muslu et al. 2017). We conjecture that compared with short-tenured CEOs,

CEOs with longer tenure are more likely to issue CSR reports with lower readability, as they

have little incentive to convey future performance information through these reports.

To test our conjecture, we constrain the sample to firms that issue standalone CSR reports

during the sample period, and calculate five readability measures following Li (2008):

percentage of complex words in the document, syllables per word, Fog index, Flesch-Kincaid

index, and Flesch Reading Ease index. Untabulated results show that longer-tenured CEOs

33

indeed tend to issue less readable CSR reports that have a higher percentage of complex words,

a greater number of syllables per word, higher Fog index and Flesch-Kincaid index values, and

lower Flesch Reading Ease index values. The results using this alternative proxy for CSR

reporting (i.e., CSR reporting readability) are thus consistent with our main results in Table 4,

and further support our main inference that due to their lower incentive to signal future

performance through CSR reporting, longer-tenured CEOs tend to issue CSR reports of lower

quality than shorter-tenured CEOs.

6.5 Controlling for the effect of CEO managerial ability

CEO tenure is also likely to correlate with CEO ability, as those who hold a position in the

long term tend to be executives with greater personal capabilities. To rule out the alternative

explanation that our results may be driven by CEOs who have a higher ability and thus a lower

incentive for signaling, we add CEO ability as an additional control variable in the regression.16

Untabulated results show that, even after controlling for CEO ability, our variable of interest,

CEO tenure, is still significantly and negatively associated with all CSR reporting variables

except CSRREPORT. These findings suggest that our main inference, that longer-tenured

CEOs have lower incentive to signal performance through CSR reporting, is not driven by

CEOs’ greater managerial ability.

16 The data on CEO ability is provided by Custodio et al. (2013), who construct five proxies for managerial ability: number of positions the CEO has occupied during his/her career, number of firms the CEO has worked for, number of industries the CEO has worked in, whether the CEO has held a CEO position at another firm, and whether the CEO has worked for a multi-division firm. They further conduct principal component analysis to form an aggregated CEO ability index.

34

7. Conclusion

Healy and Palepu (2001) identify executive motivations to voluntarily disclose

information as an important unresolved question requiring future research. In this paper, we

empirically examine the relation between CEO tenure and firms’ voluntary CSR reporting

practices. After controlling for firms’ CSR performance, we find that firms with short-tenured

CEOs (i.e., CEOs in their early years of service) tend to implement better CSR reporting

practices than firms with long-tenured CEOs, as measured by a greater likelihood of issuing

standalone CSR reports, a higher chance of issuing CSR reports with assurance and in

accordance with GRI guidelines, and a higher refined CSR reporting score,. These results are

consistent with the argument that CEOs tend to signal firms’ future performance through CSR

reporting when they have greater incentives to favorably influence market participants’

perception of their ability.

Our cross-sectional analyses further suggest that the negative relation between CEO

tenure and CSR reporting is more pronounced in firms with stronger information intermediaries,

i.e., a higher level of media coverage, more analyst following, greater institutional ownership,

and firms at a higher level of discretionary accruals. We interpret these findings to mean that

CEOs consider CSR reporting an effective and less costly mechanism for signaling firms’

future financial performance, especially when the cost associated with earnings manipulation

is high due to greater external monitoring of firms’ financial reporting practices or constrained

35

ability of CEOs to manage earnings. Overall, our study contributes to the literature by

identifying CEO tenure as an important determinant of voluntary CSR reporting practices.

36

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Appendix A: Variable definition

CSR Reporting Variables

CSRREPORT Indicator variable equal to 1 if the firm issues a standalone CSR report and 0 otherwise.

CSRAUDIT Indicator variable equal to 1 if the firm issues a standalone CSR report with third-party assurance and 0 otherwise.

CSRGRI Indicator variable equal to 1 if the firm issues a standalone CSR report following GRI guidelines and 0 otherwise.

CSRSCORE Average value of ASSET4 ESG data’s social and environment CSR components.

CSR_INFO Average value of refined ASSET4 ESG data’s social and environment CSR components by including only items that are reported or claimed by the firms.

Test Variables

TENURE Number of consecutive years the CEO has been in the current position in the firm.

LTENCEO Indicator variable equal to 1 if the CEO’s tenure >10 years and 0 otherwise. Other Variables

CSRPERF Sum of the net score from KLD’s six categories (community, diversity, employee relations, environment, human rights, and product), where the net score is sum of strengths divided by number of strength items minus sum of concerns divided by number of concern items. Source: KLD.

ATO Asset turnover ratio defined as net sales divided by total assets. PM Profit margin defined as income before extraordinary items divided by net sales. CASH Cash scaled by total assets. CFO Cash flow from operations divided by total assets. LEVERAGE Sum of long-term debt and debt in current liabilities divided by total assets. MTB Market-to-book ratio. SIZE Natural logarithm of total assets. RND R&D expense scaled by net sales. ADVERTISING Advertising expense scaled by net sales. LITIGATION Indicator variable equal to 1 if the firm operates in a high-litigation industry

(SIC codes 2833-2836, 3570-3577, 3600-3674, 5200-5961, 7370-7374, and 8731-8734) as identified by Francis et al. (1994) and 0 otherwise.

CORPGOV Corporate governance score in ASSET4. POORPERF Indicator variable equal to 1 if the firm’s ROA is in the bottom quintile within

its industry, and 0 otherwise. LEGALCASE Natural logarithm of the number of lawsuit cases filed against the firm in the

last two years. Source: AuditAnalytics. CSRBOARD Indicator variable equal to 1 if the firm has established a CSR-related board

committee in the prior year, and 0 otherwise.

42

Appendix B: Description of ASSET4 data categories (from ASSET4 documentation)

Environmental Components 1. Resource

Reduction This category measures a company’s management commitment and effectiveness toward achieving an efficient use of natural resources in the production process. It reflects a company’s capacity to reduce its use of materials, energy, or water, and to find more eco-efficient solutions by improving supply chain management.

2. Emission Reduction

This category measures a company’s management commitment and effectiveness toward reducing environmental emissions in the production and operational processes. It reflects a company’s capacity to reduce air emissions (greenhouse gases, F-gases, ozone-depleting substances, NOx and SOx, etc.), waste, hazardous waste, water discharges, spills, or its impacts on biodiversity and to partner with environmental organizations to reduce its environmental impact in the local or broader community.

3. Product Innovation

This category measures a company’s management commitment and effectiveness toward supporting the research and development of eco-efficient products or services. It reflects a company’s capacity to reduce environmental costs and burdens for its customers and thereby create new market opportunities through new environmental technologies and processes or eco-designed, dematerialized products with extended durability.

Social Components

1. Workforce / Employment Quality

This category measures a company’s management commitment and effectiveness toward providing high-quality employment benefits and job conditions. It reflects a company’s capacity to increase its workforce loyalty and productivity by distributing rewarding and fair employment benefits and by focusing on long-term employment growth and stability by promoting from within, avoiding layoffs, and maintaining relations with trade unions.

2. Workforce / Health & Safety

This category measures a company’s management commitment and effectiveness toward providing a healthy and safe workplace. It reflects a company’s capacity to increase its workforce loyalty and productivity by integrating into its day-to-day operations a concern for the physical and mental health, well-being and stress level of all employees.

3. Workforce / Training and Development

This category measures a company’s management commitment and effectiveness toward providing training and development (education) for its workforce. It reflects a company’s capacity to increase its intellectual capital, workforce loyalty and productivity by developing the workforce’s skills, competences, employability, and careers in an entrepreneurial environment.

4. Society / Human Rights

This category measures a company’s management commitment and effectiveness toward maintaining diversity and equal opportunities in its workforce. It reflects a company’s capacity to increase its workforce loyalty and productivity by promoting an effective life–work balance, a family-friendly environment, and equal opportunities regardless of gender, age, ethnicity, religion, or sexual orientation.

5. Society / Community

This category measures a company’s management commitment and effectiveness toward respecting the fundamental human rights conventions. It reflects a company’s capacity to maintain its license to operate by guaranteeing the freedom of association and excluding child, forced, or compulsory labor.

6. Customer / Product Responsibility

This category measures a company’s management commitment and effectiveness toward maintaining its reputation within the general community (local, national, and global). It reflects a company’s capacity to maintain its license to operate by being a good citizen (donations of cash, goods or staff time, etc.), protecting public health (avoidance of industrial accidents, etc.), and respecting business ethics (avoiding bribery and corruption, etc.).

43

Appendix C: Determinants of firms’ CSR reporting scores This table reports regression results of estimating determinants of firms’ CSR reporting scores. Specifically, we estimate Equation (2) in Lys et al. (2015), i.e.,𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽0 + 𝛽𝛽1𝐴𝐴𝐴𝐴𝐶𝐶 + 𝛽𝛽2𝑃𝑃𝑃𝑃 + 𝛽𝛽3𝐶𝐶𝐴𝐴𝐶𝐶𝐶𝐶 + 𝛽𝛽4𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽5𝐿𝐿𝐶𝐶𝐿𝐿𝐶𝐶𝐶𝐶𝐴𝐴𝐿𝐿𝐶𝐶 +𝛽𝛽6𝑃𝑃𝐴𝐴𝑀𝑀 + 𝛽𝛽7𝐶𝐶𝑆𝑆𝑆𝑆𝐶𝐶 + 𝛽𝛽8𝐶𝐶𝑅𝑅𝑅𝑅 + 𝛽𝛽9𝐴𝐴𝑅𝑅𝐿𝐿𝐶𝐶𝐶𝐶𝐴𝐴𝑆𝑆𝐶𝐶𝑆𝑆𝑅𝑅𝐿𝐿 + 𝛽𝛽10𝐿𝐿𝑆𝑆𝐴𝐴𝑆𝑆𝐿𝐿𝐴𝐴𝐴𝐴𝑆𝑆𝐶𝐶𝑅𝑅 + 𝛽𝛽11𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝐿𝐿𝐶𝐶𝐿𝐿 + 𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒. Using this model as the first-stage regression, we split CSRSCORE into two components: (1) the fitted value of CSRSCORE from this equation as a proxy for the optimal level of CSRSCORE, and (2) the residual from this equation as a proxy for the deviation of CSRSCORE. All firm-level continuous variables are winsorized at the 1st and the 99th percentiles. Industry and year fixed effects are included, and robust standard errors are clustered by firm. ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively. All variables are defined in Appendix A.

Dep. Var. CSRSCORE ATO 0.039*** (3.21) PM -0.042 (-0.94) CASH 0.088 (1.31) CFO 0.114 (1.38) LEVERAGE -0.018 (-0.55) MTB 0.016*** (3.03) SIZE 0.123*** (21.22) RND -0.015 (-0.44) ADVERTISING 0.241 (1.17) LITIGATION 0.032 (1.58) CORPGOV 0.618*** (15.60) Intercept -1.205*** (-12.56) N 3,380 Adj. R2 0.542

44

Table 1 Sample statistics This table reports the sample distribution by year in Panel A and descriptive statistics for our main variables of interest in Panel B. All firm-level continuous variables are winsorized at the 1st and 99th percentiles. All variables are defined in Appendix A. Panel A: Sample distribution by year

year N N

(CSRREPORT=1) CSRREPORT CSRAUDIT CSRGRI

2002 227 7 0.03 0.00 0.43

2003 233 13 0.06 0.15 0.69

2004 311 17 0.05 0.06 0.53

2005 359 16 0.04 0.13 0.69

2006 358 30 0.08 0.13 0.70

2007 380 123 0.32 0.15 0.53

2008 484 165 0.34 0.16 0.62

2009 512 190 0.37 0.15 0.65

2010 516 231 0.45 0.16 0.63

Total 3,380 792 0.23 0.15 0.62

Panel B: Descriptive statistics

N Mean Std. Dev. 1% 25% 50% 75% 99%

CSRREPORT 3,380 0.23 0.42 0.00 0.00 0.00 0.00 1.00 CSRAUDIT 792 0.15 0.36 0.00 0.00 0.00 0.00 1.00 CSRGRI 792 0.62 0.49 0.00 0.00 1.00 1.00 1.00 TENURE 3,380 8.31 6.41 0.00 3.67 6.92 11.33 31.17 LTENCEO 3,380 0.30 0.46 0.00 0.00 0.00 1.00 1.00 CSRPERF 3,380 -0.14 0.67 -1.67 -0.53 -0.17 0.17 2.07 ATO 3,380 0.96 0.71 0.12 0.46 0.79 1.18 3.66 PM 3,380 0.06 0.10 -0.32 0.03 0.06 0.10 0.25 CASH 3,380 0.09 0.10 0.00 0.02 0.06 0.13 0.43 CFO 3,380 0.12 0.08 -0.05 0.07 0.11 0.16 0.33 LEVERAGE 3,380 0.24 0.18 0.00 0.11 0.23 0.34 0.67 MTB 3,380 1.75 1.24 0.33 0.97 1.38 2.09 6.51 SIZE 3,380 8.91 1.23 6.51 7.97 8.76 9.77 12.17 RND 3,380 0.04 0.14 0.00 0.00 0.00 0.03 0.48 ADVERTISING 3,380 0.01 0.03 0.00 0.00 0.00 0.01 0.13 LITIGATION 3,380 0.28 0.45 0.00 0.00 0.00 1.00 1.00 CORPGOV 3,380 0.76 0.15 0.18 0.70 0.79 0.87 0.97 POORPERF 3,380 0.02 0.14 0.00 0.00 0.00 0.00 1.00 LEGALCASE 3,380 1.43 2.60 0.00 0.00 1.00 2.00 12.00 CSRBOARD 3,380 0.02 0.14 0.00 0.00 0.00 0.00 1.00

45

Table 2 CSR reporting across different CEO tenure groups This table presents the mean values of all three CSR reporting measures (i.e., CSRREPORT, CSRAUDIT, and CSRGRI) across different CEO tenure groups—Group 1, with CEO tenure shorter than 10 years (inclusive); Group 2, with CEO tenure longer than 10 years. The difference in means between groups are compared using a two-tailed t-test. ***indicate that the between-group difference is significant at the 1% level. All variables are defined in Appendix A. CSRREPORT CSRAUDIT CSRGRI

Group1: CEO tenure <=10 (LTENCEO=0)

0.26 (N = 2,364)

0.17 (N = 616)

0.64 (N = 616)

Group2: CEO tenure >10 (LTENCEO=1)

0.17 (N = 1,016)

0.07 (N = 176)

0.52 (N = 176)

Overall mean 0.23 (N = 3,380)

0.15 (N = 792)

0.62 (N = 792)

Difference (Group 1 - Group 2) 0.09*** 0.10*** 0.12*** t-value 5.50 3.26 2.93

46

Table 3 Correlation matrix This table describes the Spearman (Pearson) correlation coefficients below (above) the diagonal for the variables used in model (1). Significant correlations are indicated in bold (p < .10, two-tailed test). All variables are defined in Appendix A.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

1 CSRREPORT - - -0.09

-0.06

0.15

0.03

0.02

-0.03

0.00

-0.01

-0.10

0.27

-0.04 0.02

-0.03 0.39

0.10 -0.05

0.02 2 CSRAUDIT - 0.31 -0.11

-0.02

0.05

-0.04

0.03

0.04

0.04

-0.02

0.02

0.09

-0.04

0.01

-0.01

0.10

0.06

0.01

0.02

3 CSRGRI - 0.27

-0.10

-0.09

0.23

-0.04

0.10

0.10

0.13

-0.05

0.16

0.03 0.12

0.15

0.09

0.24

0.06

0.00 0.04 4 TENURE -0.10 -0.12

-0.10

0.78 -0.03

0.00 0.01

0.00 0.02

0.01

0.05

-0.04

0.00

-0.01

-0.03

-0.10

-0.04

-0.01

0.04

5 LTENCEO -0.09 -0.12

-0.10

0.72

-0.06

0.00 0.00 0.05

-0.01

0.01

0.01

-0.32

0.01

0.00

-0.02

-0.13

-0.20

0.12

-0.04

6 CSRPERF 0.11 0.02

0.20

-0.09

0.00

-0.02

0.03

0.01

0.04

-0.05

0.09

0.08

0.01

0.04

0.08

0.11

0.04

0.02

0.01

7 ATO 0.03 0.00

-0.05

0.04

0.10

0.10

-0.33

0.03

0.68

0.26

0.25

-0.02

0.00

0.00

0.01

0.04

0.00

0.01

0.00

8 PM 0.02 0.05

0.15

0.01

0.06

0.29

0.35

-0.01

-0.11

-0.14

-0.13

0.02

0.00

0.00

-0.01

0.06

0.00

-0.02

0.00

9 CASH -0.01 0.07

0.13

0.02

0.00

0.30

0.24

0.35

0.00

0.05

0.03

-0.34

0.04

0.00 0.31

-0.02

0.00 0.11

-0.02

10 CFO 0.01 0.03

0.08

0.04

0.07

0.22

0.32

0.70

0.34

0.12

0.10

0.02

0.00

0.00

-0.01

0.03

0.00 -0.02

0.00

11 LEVERAGE 0.06 -0.06

-0.05

-0.07

-0.09

-0.16

-0.30

-0.41

-0.40

-0.36

0.21

-0.04

0.00

0.00

0.01

-0.06

0.00

0.02

0.00

12 MTB -0.10 0.02

0.16

-0.03

0.04

0.35

0.17

0.75

0.35

0.67

-0.24

-0.04

0.00

0.00

0.00

-0.05

0.00 0.02

0.00 13 SIZE 0.34 0.21

0.13

0.04

-0.08

-0.19

-0.28

-0.06

-0.25

-0.08

0.03

-0.14

-0.02

-0.02

-0.22

0.16

0.23

-0.30

0.05

14 RND 0.05 0.03

0.17

-0.01

-0.04

0.43

0.03

0.37

0.45

0.28

-0.27

0.44

-0.05

0.01

0.03

0.01

0.00

0.02

0.00

15 ADVERTISING 0.03 0.09

0.13

-0.16

-0.08

0.28

0.20

0.23

0.20

0.27

-0.06

0.26

0.05

0.19

0.00

-0.05

0.00 0.01

0.00

16 LITIGATION -0.03 -0.05

0.07

0.02

0.01

0.29

0.16

0.34

0.35

0.41

-0.33

0.38

0.02

0.38

0.34

0.03

0.08

0.08

-0.02

17 CORPGOV 0.50 0.02

0.22

0.12

0.09

0.06

0.08

0.11

0.07

0.14

-0.11

0.03

0.03

0.04

0.01

0.08

0.09

-0.06

0.02

18 POORPERF 0.10 0.10

0.09

0.04

-0.02

0.04

0.03

0.12

0.16

0.15

-0.18

0.09

0.43

0.25

0.21

0.36

-0.01

-0.04

0.01

19 LEGALCASE -0.02 -0.02

0.03

-0.02

-0.04

-0.04

0.00

-0.20

-0.01

-0.04

0.09

-0.13

0.00

-0.05

0.07

0.00

-0.03

0.01

-0.02

20 CSRBOARD 0.04 0.03

0.00

-0.06

-0.02

0.00

0.07

-0.02

0.02

0.06

0.02

-0.01

-0.12

-0.04

0.06

0.03

0.08

-0.07

0.04

47

Table 4 CEO tenure and CSR reporting Panel A of this table reports regression results for the effect of CEO tenure on CSR reporting characteristics (H1). Dependent variables include issuance of a standalone CSR report (CSRREPORT, Columns 1–2), issuance of a standalone CSR report with third-party assurance (CSRAUDIT, Columns 3–4), and issuance of a standalone CSR report following GRI guidelines (CSRGRI, Columns 5–6). The key independent variable is measured as a continuous variable, TENURE, or a long-tenured CEO indicator, LTENCEO, respectively. All firm-level continuous variables are winsorized at the 1st and the 99th percentiles. Industry and year fixed effects are included and robust standard errors are clustered by firm. ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively. All variables are defined in Appendix A.

Panel A: CEO tenure and characteristics of CSR reporting

1 2 3 4 5 6 Dep. Var. CSRREPORT CSRAUDIT CSRGRI TENURE -0.002** -0.062** -0.056***

(-2.07) (-2.11) (-2.96) LTENCEO -0.029** -1.680*** -0.522**

(-2.32) (-4.70) (-2.45) CSRPERF 0.105*** 0.138*** 0.440*** 0.440*** 0.833*** 0.837***

(11.25) (16.19) (3.34) (3.26) (6.55) (6.57) ATO 0.063*** 0.066*** -0.230 -0.371 -0.154 -0.162

(4.98) (5.68) (-0.89) (-1.41) (-0.78) (-0.82) PM -0.073 -0.060 1.096 1.701 -1.182 -1.230

(-0.77) (-0.70) (0.33) (0.50) (-0.45) (-0.47) CASH -0.068 -0.078 1.243 0.201 3.312* 3.276*

(-0.78) (-0.97) (0.63) (0.10) (1.87) (1.83) CFO -0.074 -0.135 -1.555 -1.182 -5.349** -5.304**

(-0.59) (-1.19) (-0.50) (-0.37) (-2.02) (-2.01) LEVERAGE 0.038 0.029 -1.708 -2.111** -1.631** -1.767**

(0.88) (0.74) (-1.61) (-1.98) (-1.96) (-2.11) MTB 0.020*** 0.024*** 0.300 0.301 0.783*** 0.767***

(2.67) (3.53) (1.24) (1.22) (3.60) (3.53) SIZE 0.112*** 0.127*** 0.577*** 0.494*** 0.285*** 0.250**

(16.21) (20.28) (4.09) (3.47) (2.71) (2.36) RND 0.014 0.014 -6.940** -8.662** -1.426 -1.947

(0.25) (0.28) (-2.03) (-2.46) (-0.50) (-0.68) ADVERTISING 0.269 0.332* 2.791 2.671 12.292** 12.452**

(1.24) (1.72) (0.72) (0.68) (2.40) (2.46) LITIGATION -0.013 -0.017 0.504 0.517 0.851* 0.811*

(-0.60) (-0.89) (0.92) (0.95) (1.90) (1.80) CORPGOV 0.760*** 0.638*** 6.632*** 6.456*** 9.145*** 9.135***

(16.43) (15.25) (3.42) (3.28) (6.34) (6.34) POORPERF -0.037 -0.019 0.964 1.245 0.579 0.671 (-0.67) (-0.39) (0.89) (1.08) (0.62) (0.72) LEGALCASE -0.003 -0.010 -0.231 -0.134 0.064 0.099

(-0.31) (-1.04) (-1.15) (-0.64) (0.40) (0.62) CSRBOARD 0.028 0.026 0.986 0.668 -1.803** -1.755**

(0.54) (0.54) (1.11) (0.73) (-2.21) (-2.19) Intercept -1.532*** -1.596*** -10.083*** -8.719*** -10.724*** -10.688***

(-19.36) (-22.78) (-4.13) (-3.54) (-5.07) (-5.07) N 3,380 3,380 792 792 792 792 pseudo R2 0.441 0.529 0.216 0.251 0.278 0.276

48

(Table 4 cont’d) Panel B of this table reports regression results for the effect of CEO tenure on refined CSR reporting scores constructed from ASSET4 database (H1). Dependent variables include EN_INFO (SO_INFO), i.e., ASSET4 ESG data’s social (environment) CSR components, refined by only including items reported or claimed by managers, and CSR_INFO, which is measured as the average value of EN_INFO and SO_INFO. The key independent variable is measured as a continuous variable, TENURE, or a long-tenured CEO indicator, LTENCEO, respectively. All firm-level continuous variables are winsorized at the 1st and the 99th percentiles. Industry and year fixed effects are included and robust standard errors are clustered by firm. ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively. All variables are defined in Appendix A. Panel B: CEO tenure and refined CSR reporting scores 1 2 3 4 5 6 Dep. Var. CSR_INFO EN_INFO SO_INFO TENURE -0.005** -0.006** -0.001***

(-2.26) (-2.38) (-2.92) LTENCEO -0.016*** -0.018*** -0.013***

(-5.28) (-5.07) (-3.82) CSRPERF 0.034*** 0.034*** 0.033*** 0.033*** 0.036*** 0.036***

(13.70) (14.06) (11.60) (11.89) (13.22) (13.62) ATO 0.012*** 0.013*** 0.009*** 0.010*** 0.019*** 0.020***

(4.14) (4.57) (2.69) (3.13) (5.90) (6.23) PM -0.030 -0.022 -0.045* -0.037* 0.006 0.009

(-1.30) (-1.17) (-1.72) (-1.68) (0.25) (0.44) CASH 0.027 0.027 0.015 0.015 0.047** 0.052**

(1.34) (1.42) (0.64) (0.68) (2.11) (2.47) CFO 0.062** 0.043 0.051 0.030 0.076** 0.072**

(2.13) (1.64) (1.54) (1.00) (2.38) (2.46) LEVERAGE -0.008 -0.011 -0.004 -0.006 -0.019* -0.019**

(-0.81) (-1.26) (-0.33) (-0.64) (-1.78) (-2.01) MTB 0.007*** 0.008*** 0.005** 0.007*** 0.011*** 0.011***

(3.73) (5.05) (2.57) (3.87) (5.48) (5.81) SIZE 0.059*** 0.056*** 0.060*** 0.057*** 0.056*** 0.054***

(34.52) (34.90) (30.78) (30.87) (29.82) (30.54) RND -0.016 -0.017 -0.026 -0.025* 0.003 0.001

(-1.17) (-1.36) (-1.63) (-1.73) (0.20) (0.05) ADVERTISING 0.017 -0.045 -0.017 -0.086 0.062 0.045

(0.30) (-0.83) (-0.26) (-1.39) (0.96) (0.76) LITIGATION 0.014*** 0.012** 0.011** 0.009* 0.021*** 0.017***

(2.83) (2.51) (1.97) (1.72) (3.78) (3.35) CORPGOV 0.216*** 0.208*** 0.229*** 0.224*** 0.180*** 0.174***

(19.65) (21.11) (18.26) (19.81) (14.94) (16.08) POORPERF 0.005 0.012 -0.003 0.003 0.023 0.031** (0.36) (1.02) (-0.19) (0.21) (1.49) (2.47) LEGALCASE -0.003 -0.002 -0.004 -0.003 -0.001 -0.000

(-1.23) (-0.82) (-1.35) (-0.98) (-0.23) (-0.10) CSRBOARD 0.016 0.017 0.029** 0.028** -0.012 -0.008

(1.48) (1.58) (2.31) (2.32) (-1.03) (-0.72) Intercept -0.238*** -0.210*** -0.275*** -0.248*** -0.143*** -0.125***

(-5.85) (-5.28) (-5.91) (-5.43) (-3.20) (-2.86) N 3,333 3,333 3,333 3,333 3,333 3,333 pseudo R2 0.531 0.526 0.493 0.487 0.448 0.440

49

Table 5 Information intermediaries and the relation between CEO tenure and CSR reporting Panel A of this table reports regression results for the effect of information intermediaries (as proxied by media coverage) on the relation between CEO tenure and characteristics of CSR reporting (H2). Media coverage is defined as total amount of media coverage for each firm during the year, scaled by firm size, with data on media coverage obtained from the RavenPack database. To facilitate interpretation, we create an indicator HIGHMEDIA which equals one if the firm’s media coverage is above the industry median, and 0 otherwise. All firm-level continuous variables are winsorized at the 1st and the 99th percentiles. Industry and year fixed effects are included, and robust standard errors are clustered by firm. ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively. All other variables are defined in Appendix A. Panel A: Effect of media coverage on the relation between CEO tenure and CSR reporting

1 2 3 4 5 6 Dep. Var. CSRREPORT CSRAUDIT CSRGRI TENURE -0.018*** -0.915** -0.006

(-3.00) (-2.23) (-1.25) LTENCEO -0.627*** -0.922** -0.138***

(-2.67) (-2.25) (-2.81) HIGHMEDIA 0.097*** 0.027 0.005 0.056 1.672* -0.050 (3.14) (1.25) (1.60) (1.21) (1.79) (-1.42) TENURE*HIGHMEDIA -0.020*** -0.008* -0.021* (-3.42) (-1.94) (-1.69) LTENCEO*HIGHMEDIA -0.630*** -0.957** -0.077* (-2.69) (-2.33) (-1.79) CSRPERF 0.102*** 0.101*** 0.581*** 0.544*** 0.138*** 0.090***

(9.43) (5.02) (3.42) (3.26) (2.87) (7.66) ATO 0.072*** 0.061*** -1.113** -1.107** 0.004 -0.018

(5.07) (3.19) (-2.09) (-2.11) (0.06) (-0.83) PM -0.067 -0.065 -0.709 -0.636 0.266 0.018

(-0.66) (-0.56) (-1.15) (-1.04) (0.27) (0.06) CASH -0.061 -0.266** 0.222 0.245 -0.031 0.868***

(-0.62) (-2.10) (0.76) (0.83) (-0.04) (4.95) CFO -0.175 -0.415** -1.161 -1.000 -0.042 -0.709***

(-1.26) (-2.33) (-0.21) (-0.18) (-0.05) (-2.62) LEVERAGE 0.048 -0.049 -0.230 -0.216 -0.488 -0.050

(1.02) (-0.87) (-0.15) (-0.14) (-1.37) (-0.54) MTB 0.016** 0.033*** -0.619 -0.567 -0.015 0.085***

(2.00) (3.21) (-1.54) (-1.44) (-0.18) (4.09) SIZE 0.093*** 0.072*** 0.804*** 0.752*** 0.166** 0.063***

(10.21) (4.60) (3.21) (3.02) (2.40) (5.19) RND -0.026 -0.076 0.316 0.725 -0.712 0.190

(-0.46) (-1.16) (0.07) (0.15) (-0.43) (0.69) ADVERTISING 0.348 0.337 1.113 1.090 2.131* 0.409

(1.46) (1.10) (1.48) (1.45) (1.78) (1.02) LITIGATION 0.001 -0.034 0.864 0.891 0.228 0.032

(0.06) (-1.13) (1.07) (1.11) (1.45) (0.74) CORPGOV 0.688*** 0.511*** 3.879 3.479 1.828*** 2.159***

(12.86) (7.23) (1.52) (1.39) (3.59) (14.38) POORPERF -0.013 -0.027 -0.968 -1.134 0.516 0.048

(-0.19) (-0.23) (-0.80) (-0.83) (0.87) (0.46) LEGALCASE -0.006 0.030 -0.362 -0.363 -0.004 0.044** (-0.44) (1.46) (-1.09) (-1.08) (-0.05) (2.36) CSRBOARD 0.038 0.157 -0.214* -1.444** -0.199 0.072

(0.61) (1.57) (-1.76) (-2.40) (-0.75) (1.00) Intercept -2.446*** -1.044*** -2.459 -2.230 -2.258*** -2.459***

(-6.97) (-6.73) (-0.66) (-0.60) (-2.80) (-7.72) N 3,380 3,380 792 792 792 792 Adj. R2 0.446 0.454 0.240 0.237 0.309 0.374

50

(Table 5 cont’d) Panel B of this table reports regression results for the effect of information intermediaries (as proxied by analyst coverage) on the relation between CEO tenure and characteristics of CSR reporting (H2). Analyst coverage is measured as the number of analysts following the firm during the year, with analyst coverage data obtained from I/B/E/S database. To facilitate interpretation, we create an indicator HIGHANCOV which equals one if the firm’s analyst coverage is above the industry median, and 0 otherwise. All firm-level continuous variables are winsorized at the 1st and the 99th percentiles. Industry and year fixed effects are included, and robust standard errors are clustered by firm. ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively. All other variables are defined in Appendix A.

Panel B: Effect of analyst coverage on the relation between CEO tenure and CSR reporting 1 2 3 4 5 6 Dep. Var. CSRREPORT CSRAUDIT CSRGRI TENURE -0.001 -0.113** -0.232

(-0.94) (-2.56) (-0.84) LTENCEO -0.008 -2.123*** -0.432**

(-0.53) (-4.44) (-2.27) HIGHANCOV -0.018 -0.025 0.956* -0.475 0.040* -0.112 (-0.80) (-1.38) (1.76) (-1.43) (1.68) (-0.38) TENURE*HIGHANCOV -0.003* -0.089* -0.063** (-1.90) (-1.67) (-2.22) LTENCEO*HIGHANCOV -0.095*** -1.557*** -0.579** (-4.49) (-3.03) (-2.54) CSRPERF 0.154*** 0.292*** 0.446*** 0.452*** 0.738*** 0.559***

(19.35) (3.12) (3.35) (3.31) (7.62) (6.85) ATO 0.066*** 0.065*** -0.167 -0.329 -0.061 -0.056

(6.14) (5.67) (-0.65) (-1.25) (-0.41) (-0.43) PM -0.019 -0.068 0.919 1.428 1.096 0.348

(-0.24) (-0.80) (0.27) (0.42) (0.60) (0.21) CASH -0.090 -0.082 0.934 0.063 6.172*** 2.657**

(-1.20) (-1.02) (0.47) (0.03) (4.55) (2.43) CFO -0.092 -0.097 -0.993 -0.434 -6.020*** -4.826***

(-0.88) (-0.86) (-0.31) (-0.13) (-3.08) (-2.85) LEVERAGE 0.038 0.016 -1.887* -2.514** -0.143 -0.379

(1.06) (0.41) (-1.73) (-2.27) (-0.22) (-0.66) MTB 0.027*** 0.026*** 0.285 0.288 0.653*** 0.566***

(4.34) (3.80) (1.16) (1.15) (4.29) (4.22) SIZE 0.139*** 0.133*** 0.607*** 0.545*** 0.558*** 0.364***

(22.41) (20.18) (4.09) (3.64) (5.82) (4.41) RND 0.018 0.022 -6.508* -7.894** 1.320 -0.751

(0.40) (0.44) (-1.87) (-2.23) (0.61) (-0.41) ADVERTISING 0.198 0.328* 2.393 2.676 9.272** 6.289**

(1.08) (1.70) (0.62) (0.68) (2.47) (2.02) LITIGATION 0.030 0.010 0.528 0.497 0.493 0.558**

(1.62) (0.50) (0.96) (0.91) (1.54) (1.99) CORPGOV 0.561*** 0.626*** 6.727*** 6.379*** 13.405*** 8.484***

(14.19) (14.93) (3.47) (3.24) (11.08) (8.76) POORPERF 0.049 -0.022 0.898 1.188 0.603 0.388

(1.03) (-0.45) (0.82) (1.02) (0.87) (0.64) LEGALCASE -0.009 -0.010 -0.239 -0.147 0.380*** 0.164 (-0.95) (-1.03) (-1.20) (-0.71) (2.85) (1.42) CSRBOARD -0.006 0.018 0.885 0.586 0.507 0.161

(-0.12) (0.39) (0.99) (0.64) (1.00) (0.37) Intercept -1.643*** -1.637*** -9.994*** -9.067*** -24.059*** -13.989***

(-23.94) (-23.04) (-3.98) (-3.61) (-10.99) (-8.71) N 3,380 3,380 792 792 792 792 Adj. R2 0.585 0.533 0.221 0.256 0.343 0.221

51

(Table 5 cont’d) Panel C of this table reports regression results for the effect of information intermediaries (as proxied by institutional ownership) on the relation between CEO tenure and characteristics of CSR reporting (H2). Institutional ownership is measured by the percentage of outstanding shares held by institutional investors for each firm during the year, with ownership data obtained from Thomson Reuters 13-f database. To facilitate interpretation, we create an indicator HIGHINST which equals one if the firm’s institutional ownership is above the industry median, and 0 otherwise. All firm-level continuous variables are winsorized at the 1st and the 99th percentiles. Industry and year fixed effects are included, and robust standard errors are clustered by firm. ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively. All other variables are defined in Appendix A. Panel C: Effect of institutional ownership on the relation between CEO tenure and CSR reporting 1 2 3 4 5 6 Dep. Var. CSRREPORT CSRAUDIT CSRGRI TENURE -0.005*** -0.024 -0.005

(-3.71) (-1.12) (-1.58) LTENCEO -0.071*** -2.041*** -0.078**

(-4.13) (-4.19) (-2.02) HIGHINST -0.012 -0.025 -2.905 -0.407 0.160** 0.027 (-0.07) (-1.23) (-0.78) (-1.25) (2.53) (0.76) TENURE*HIGHINST -0.004** -0.075* -0.016*** (-2.09) (-1.91) (-2.63) LTENCEO*HIGHINST -0.075*** -1.375*** -0.080* (-3.86) (-2.71) (-1.76) CSRPERF 0.117*** 0.094*** 0.237** 0.358** 0.122*** 0.123***

(10.71) (9.76) (2.45) (2.53) (8.04) (8.08) ATO 0.094*** 0.060*** -0.517** -0.384 -0.096*** -0.093***

(6.01) (4.65) (-2.40) (-1.43) (-3.58) (-3.47) PM 0.202 0.003 -2.564 2.193 -0.379 -0.444

(1.16) (0.03) (-0.98) (0.62) (-1.14) (-1.34) CASH 0.097 -0.054 7.059*** 0.045 1.094*** 1.126***

(0.78) (-0.60) (4.41) (0.02) (4.97) (5.09) CFO 0.063 -0.092 5.054* -1.325 -0.896*** -0.893***

(0.34) (-0.69) (1.92) (-0.41) (-2.66) (-2.67) LEVERAGE 0.004 0.062 -1.658* -2.051* -0.411*** -0.369***

(0.07) (1.40) (-1.83) (-1.88) (-3.68) (-3.32) MTB 0.004 0.018** 0.040 0.353 0.150*** 0.160***

(0.43) (2.33) (0.20) (1.38) (5.59) (5.95) SIZE 0.124*** 0.107*** 0.607*** 0.455*** 0.078*** 0.073***

(14.70) (14.67) (5.35) (3.00) (5.11) (4.72) RND 0.338** 0.011 -8.499*** -3.243 0.361 0.174

(2.19) (0.19) (-2.94) (-0.80) (1.02) (0.49) ADVERTISING 0.376 0.297 -7.559** 2.790 1.194*** 1.207***

(1.43) (1.32) (-2.07) (0.69) (2.60) (2.63) LITIGATION -0.064** -0.017 -0.082 -0.235 -0.008 0.011

(-2.48) (-0.78) (-0.19) (-0.38) (-0.14) (0.18) CORPGOV 0.778*** 0.824*** 3.919** 6.858*** 2.525*** 2.552***

(12.61) (17.08) (2.56) (3.34) (13.14) (13.15) POORPERF 0.009 -0.035 0.849 1.235 0.081 0.150

(0.13) (-0.59) (0.90) (1.04) (0.64) (1.17) LEGALCASE -0.041*** -0.002 -0.201 -0.161 0.016 0.022 (-2.96) (-0.15) (-1.23) (-0.74) (0.74) (0.98) CSRBOARD 0.128* 0.024 1.363** 0.617 -0.421*** -0.433***

(1.87) (0.45) (2.33) (0.67) (-4.15) (-4.26) Intercept -1.613*** -1.506*** -10.108*** -8.507*** -2.586*** -2.607***

(-17.37) (-18.22) (-4.37) (-3.33) (-8.89) (-8.94) N 3,380 3,380 792 792 792 792 Adj. R2 0.545 0.448 0.231 0.257 0.550 0.552

52

Table 6 Discretionary accruals and the relation between CEO tenure and CSR reporting

This table reports regression results for the effect of earnings management on the relation between CEO tenure and CSR reporting (H3). ABS_DA is accrual-based earnings management, measured by the absolute value of discretionary accruals, where discretionary accruals are computed using the modified Jones model including lagged ROA as a regressor. RM is real earnings management, measured by the sum of three real activities manipulation proxies (-1*abnormal level of cash flows from operations + abnormal level of production costs - abnormal level of discretionary expenses). All firm-level continuous variables are winsorized at the 1st and the 99th percentiles. Industry and year fixed effects are included, and robust standard errors are clustered by firm. ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively. All other variables are defined in Appendix A. 1 2 3 4 5 6 Dep. Var. CSRREPORT CSRAUDIT CSRGRI TENURE -0.001 -0.003* -0.005*

(-1.11) (-1.89) (-1.83) LTENCEO -0.047*** -0.009 -0.087***

(-3.63) (-0.56) (-2.82) ABS_DA 0.008** 0.001 0.009*** 0.685*** 0.036 0.019

(2.18) (0.09) (3.60) (5.22) (0.92) (0.70) TENURE*ABS_DA -0.001** -0.089*** -0.011** (-2.13) (-3.63) (-2.55) LTENCEO*ABS_DA -0.033** -0.459*** -0.002 (-1.99) (-5.41) (-0.05) RM 0.039 -0.049 -0.022 -0.002 -0.025 0.120 (0.56) (-0.82) (-0.93) (-0.61) (-0.14) (0.91) TENURE*RM -0.003 -0.001 0.005 (-0.55) (-0.21) (0.26) LTENCEO*RM -0.026 0.002 -0.157 (-0.28) (0.24) (-0.74) CSRPERF 0.142*** 0.102*** 0.031*** 0.028*** 0.097*** 0.084***

(23.50) (14.66) (4.27) (4.02) (8.01) (7.21) ATO 0.061*** 0.054*** -0.024* -0.009 -0.007 0.018

(6.82) (5.24) (-1.70) (-0.65) (-0.32) (0.76) PM -0.007 -0.043 -0.326* -0.188 0.027 -0.302

(-0.10) (-0.61) (-1.94) (-1.23) (0.10) (-1.12) CASH -0.008 0.049 0.115 0.141 0.894*** 0.841***

(-0.13) (0.75) (1.13) (1.43) (4.90) (4.62) CFO 0.029 0.005 0.265 0.195 -0.737*** -0.820***

(0.34) (0.06) (1.58) (1.24) (-2.65) (-3.03) LEVERAGE -0.031 -0.020 -0.251*** -0.181*** -0.133 -0.099

(-1.12) (-0.65) (-4.31) (-3.35) (-1.41) (-1.09) MTB 0.020*** 0.016*** 0.038*** 0.033** 0.092*** 0.127***

(3.67) (2.69) (2.78) (2.46) (4.03) (5.70) SIZE 0.141*** 0.115*** 0.090*** 0.085*** 0.066*** 0.081***

(28.92) (20.56) (12.32) (12.28) (5.37) (6.81) RND 0.015 -0.030 -0.471*** -0.486*** 0.067 0.170

(0.37) (-0.64) (-2.64) (-2.84) (0.23) (0.58) ADVERTISING 0.124 -0.090 -0.837*** -0.889*** 0.384 0.308

(0.76) (-0.50) (-3.42) (-3.74) (0.97) (0.79) LITIGATION -0.013 -0.034** -0.007 -0.006 0.064 0.080*

(-0.94) (-2.06) (-0.26) (-0.22) (1.42) (1.79) CORPGOV 0.803*** 0.847*** 0.190** 0.217** 2.265*** 2.238***

(23.56) (23.30) (2.05) (2.52) (14.36) (15.02) POORPERF 0.087** 0.074* -0.020 0.013 0.005 -0.176**

(2.33) (1.91) (-0.32) (0.26) (0.04) (-1.99) LEGALCASE -0.006 -0.003 -0.053*** -0.049*** 0.027 0.004 (-0.70) (-0.36) (-4.54) (-4.45) (1.43) (0.23) CSRBOARD 0.106*** 0.101*** 0.076* 0.057 0.097 0.087

(3.26) (2.69) (1.75) (1.31) (1.33) (1.18) Intercept -1.761*** -1.714*** -0.739*** -0.924*** -2.703*** -2.893***

(-8.97) (-8.28) (-3.40) (-6.65) (-7.32) (-7.91) N 3,338 3,338 737 737 737 737 Adj. R2 0.631 0.448 0.321 0.322 0.401 0.406

53

Table 7 CSR reporting and future financial performance

Panel A of this table reports results from the second-stage regression in which the dependent variables are firms’ future financial performance, measured as year t+1 changes in ROA, defined as income before extraordinary items divided by total assets (Columns 1-3) or changes in TBQ, i.e., Tobin’s Q, defined as market value of assets divided by book value of assets (Columns 4-6); the key independent variables are the deviation component (DEVIATION) of CSR reporting score and optimal component (OPTIMAL_CSR), estimated as the residual and fitted values from the first-stage regression, respectively (see Appendix C). DDPS is percent change in dividend per share for fiscal year. All firm-level continuous variables are winsorized at the 1st and the 99th percentiles. Industry and year fixed effects are included, and robust standard errors are clustered by firm. ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively. All other variables are defined in Appendix A.

Panel A: Optimal and deviated CSR reporting (second-stage regression) and future financial performance

1 2 3 4 5 6

Full Sample Short-tenured

Long-tenured Full Sample Short-

tenured Long-tenured

Dep. Var. ΔROAt+1 ΔROAt+1 ΔROAt+1 ΔTBQt+1 ΔTBQt+1 ΔTBQt+1

DEVIATION 0.008*** 0.013*** 0.002 0.191*** 0.186** 0.144

(2.63) (3.35) (0.41) (3.15) (2.58) (1.26)

OPTIMAL_CSR -0.004 -0.002 -0.012** -0.131* -0.060 -0.346**

(-1.23) (-0.51) (-2.02) (-1.79) (-0.69) (-2.50)

CSRREPORT -0.004* -0.005** -0.001 0.001 -0.025 0.063

(-1.85) (-2.17) (-0.22) (0.03) (-0.56) (0.85)

CSRAUDIT 0.002 0.001 0.009 -0.050 -0.037 -0.191

(0.77) (0.28) (1.20) (-0.88) (-0.61) (-1.08)

CSRGRI 0.006*** 0.007*** 0.008** 0.015 -0.006 0.102

(2.99) (2.79) (1.97) (0.36) (-0.13) (1.12)

DDPS 0.004 0.003 0.001 0.006 0.005 0.018

(0.76) (0.08) (0.87) (0.80) (0.61) (0.59)

ROAt-1 -0.351*** -0.373*** -0.280*** (-41.82) (-36.54) (-19.64)

ΔROAt -0.457*** -0.481*** -0.333***

(-49.50) (-44.75) (-18.19) Intercept 0.025** 0.027** 0.016 0.382* 0.425* 0.242

(2.35) (2.07) (0.95) (1.89) (1.78) (0.63)

N 3,380 2,364 1,016 3,380 2,364 1,016 Adj. R2 0.421 0.448 0.323 0.089 0.077 0.118

54

(Table 7, cont’d)

Panel B of this table reports regression results in which the dependent variables are firms’ future financial performance, measured as year t+1 changes in ROA, defined as income before extraordinary items divided by total assets (Columns 1–3) or changes in TBQ, i.e., Tobin’s Q, defined as market value of assets divided by book value of assets (Columns 4–6); the independent variables are the raw CSR score plus all CSR score determinants described and presented in the first-stage regression (see Appendix C) as additional controls. DDPS is percent change in dividend per share for fiscal year. Given that all CSR score determinants are included in the model examining the relationship between future financial performance and CSR score, the optimal CSR score is subsumed by the control variables. All firm-level continuous variables are winsorized at the 1st and the 99th percentiles. Industry and year fixed effects are included, and robust standard errors are clustered by firm. ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively. All other variables are defined in Appendix A.

Panel B: Raw CSR reporting measure (the single-stage model) and future financial performance

1 2 3 4 5 6 Full Sample Short-tenured Long-tenured Full Sample Short-tenured Long-tenured

Dep. Var. ΔROAt+1 ΔROAt+1 ΔROAt+1 ΔTBQt+1 ΔTBQt+1 ΔTBQt+1 CSRSCORE 0.009*** 0.011*** 0.003 0.195*** 0.210*** 0.128

(2.68) (2.62) (0.51) (3.15) (2.61) (1.44) CSRREPORT -0.001 0.001 0.001 -0.023 -0.054* 0.064

(-0.28) (0.02) (0.23) (-0.90) (-1.85) (1.46) CSRAUDIT -0.001 -0.003 0.004 -0.007 -0.002 -0.127

(-0.28) (-0.47) (0.47) (-0.20) (-0.05) (-1.25) CSRGRI 0.003 0.002 0.008* 0.042* 0.024 0.098*

(1.64) (0.98) (1.96) (1.73) (0.87) (1.67)

DDPS 0.002 0.002 0.002* 0.007* 0.006 0.019

(0.43) (0.42) (1.70) (1.91) (1.64) (1.05)

ROAt-1 -0.625*** -0.645*** -0.545*** (-29.90) (-24.23) (-14.91) ΔROAt -0.661*** -0.675*** -0.574*** (-33.92) (-28.24) (-16.14) Intercept -0.009 -0.016 0.004 1.511*** 1.442*** 1.570***

(-1.11) (-1.59) (0.32) (6.41) (5.73) (5.91)

All Other Determinants of CSR

Included Included Included Included Included Included

N 3,380 2,364 1,016 3,380 2,364 1,016 Adj. R2 0.570 0.599 0.532 0.256 0.249 0.302

55

Table 8 Robustness test on the sample without CEO turnovers This table restricts the sample to firms that have no CEO turnover events during the sample period and reports regression results for the effect of CEO tenure on CSR reporting characteristics (H1). Dependent variables include issuance of a standalone CSR report (CSRREPORT, Columns 1–2), issuance of a standalone CSR report with third-party assurance (CSRAUDIT, Columns 3–4), and issuance of a standalone CSR report following GRI guidelines (CSRGRI, Columns 5–6). The key independent variable is measured as a continuous variable, TENURE, or a long-tenured CEO indicator, LTENCEO, respectively. All firm-level continuous variables are winsorized at the 1st and the 99th percentiles. Industry and year fixed effects are included and robust standard errors are clustered by firm. ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively. All variables are defined in Appendix A.

1 2 3 4 5 6 Dep. Var. CSRREPORT CSRAUDIT CSRGRI TENURE -0.002* -0.097* -0.051**

(-1.84) (-1.79) (-2.40) LTENCEO -0.028*** -1.604*** -1.037***

(-2.63) (-2.71) (-3.73) CSRPERF 0.104*** 0.136*** 0.380*** 0.381*** 0.600*** 0.608***

(14.00) (19.76) (4.12) (4.13) (3.63) (3.63) ATO 0.055*** 0.066*** -0.492** -0.498** 0.425 0.468*

(5.36) (7.00) (-2.45) (-2.48) (1.61) (1.75) PM -0.046 -0.007 -2.081 -2.080 8.189* 7.787*

(-0.50) (-0.08) (-0.90) (-0.90) (1.84) (1.73) CASH 0.030 0.011 5.086*** 5.107*** 2.158* 2.330**

(0.43) (0.17) (3.92) (3.95) (1.89) (1.98) CFO 0.054 -0.021 2.391 2.430 -4.324 -2.383

(0.52) (-0.22) (1.05) (1.07) (-1.21) (-0.65) LEVERAGE -0.011 -0.018 -2.049** -2.076*** -4.013** -3.864**

(-0.33) (-0.57) (-2.57) (-2.60) (-2.19) (-2.10) MTB 0.013** 0.016*** 0.098 0.095 -0.131 -0.192

(1.98) (2.66) (0.56) (0.54) (-0.50) (-0.73) SIZE 0.110*** 0.122*** 0.746*** 0.740*** 0.204 0.226

(18.61) (22.60) (7.42) (7.36) (1.29) (1.40) RND 0.032 0.060 -6.725*** -6.746*** 10.970** 9.545*

(0.53) (1.11) (-2.60) (-2.61) (2.20) (1.96) ADVERTISING -0.030 0.034 -7.926** -7.856** -8.896 -11.704

(-0.15) (0.18) (-2.21) (-2.20) (-0.89) (-1.17) LITIGATION -0.024 -0.033** -0.151 -0.164 1.441** 1.453*

(-1.37) (-2.04) (-0.38) (-0.42) (1.97) (1.93) CORPGOV 0.889*** 0.839*** 5.029*** 5.058*** 8.913*** 9.198***

(22.27) (22.74) (3.59) (3.61) (4.94) (5.06) POORPERF -0.043 -0.043 0.585 0.574 1.043 0.883 (-0.94) (-1.03) (0.67) (0.66) (0.92) (0.78) LEGALCASE 0.002 0.002 -0.171 -0.172 0.091 0.067

(0.21) (0.21) (-1.18) (-1.19) (0.39) (0.28) CSRBOARD 0.094** 0.114*** 0.575 0.576 -0.747 -0.546

(2.36) (3.11) (0.93) (0.93) (-0.98) (-0.72) Intercept -1.564*** -1.596*** -12.477*** -12.569*** -10.719*** -11.140***

(-12.37) (-22.78) (-5.60) (-5.64) (-4.47) (-4.65) N 1,156 1,156 226 226 226 226 pseudo R2 0.449 0.539 0.218 0.218 0.274 0.289

56

Table 9 Robustness test on short-tenured CEOs without prior CEO experience This table reports regression results for the effect of prior CEO experience on CSR reporting characteristics in a sample of firms with shorter-tenured CEOs (LTENCEO=0). The key independent variable NEWCEO is an indicator that equals one if the CEO has no prior CEO experience at other public firms, and zero otherwise. All firm-level continuous variables are winsorized at the 1st and the 99th percentiles. Industry and year fixed effects are included and robust standard errors are clustered by firm. ***, **, and * indicate statistical significance at the 1%, 5%, and 10% levels, respectively. All other variables are defined in Appendix A.

1 2 3 Dep. Var. CSRREPORT CSRAUDIT CSRGRI NEWCEO 0.075*** 0.621 0.723**

(3.36) (0.51) (2.07) CSRPERF 0.127*** 0.142 0.834***

(12.64) (0.88) (7.07) ATO 0.047*** -2.881** -0.293

(3.80) (-2.26) (-1.49) PM -0.122 1.754 1.538

(-1.41) (0.16) (0.73) CASH 0.091 6.345** 11.934***

(1.10) (2.52) (6.54) CFO -0.112 -6.365 -7.814***

(-0.96) (-1.51) (-3.34) LEVERAGE 0.002 -6.042*** 0.026

(0.04) (-3.47) (0.03) MTB 0.019*** 0.238 0.615***

(2.59) (0.31) (3.39) SIZE 0.127*** 2.584*** 0.523***

(18.71) (4.39) (5.01) RND -0.057 -8.344** -2.724

(-1.14) (-2.15) (-0.96) ADVERTISING 0.323 -10.413* 5.788

(1.40) (-1.95) (1.50) LITIGATION 0.001 0.660 0.159

(0.04) (1.00) (0.41) CORPGOV 0.607*** 3.978* 16.849***

(13.33) (1.67) (10.70) POORPERF -0.042 1.048 0.978 (-0.80) (0.78) (1.20) LEGALCASE 0.001 0.051 0.434**

(0.07) (0.20) (2.51) CSRBOARD 0.110** 3.789*** -0.125

(2.50) (3.95) (-0.19) Intercept -1.463*** -10.057*** -9.999***

(-16.73) (-3.48) (-4.10) N 2,364 616 616 pseudo R2 0.508 0.681 0.391