Corporate social responsibility as a conflict between owners

In recent years firms have greatly increased the amount of resources allocated to activities classified as Corporate Social Responsibility (CSR). This increase in CSR expenditure may be consistent with firm value maximization if it comes as a response to changes in stakeholders’ preferences. However, we argue that insiders (managers and large blockholders who are affiliated with the firm) may want to over-invest in CSR for their private benefit since it improves their reputation as being good global citizens. We test this hypothesis by investigating the relation between firms’ CSR ratings and their ownership and capital structure.