The Interplay of CEO Ability and Governance Robustness on the Performance Effects of Corporate Social Responsibility

This study investigates how the association between corporate social responsibility and firm performance, documented in prior research, is affected by the joint effects of managerial ability and attributes of the firm’s governance structure. We find that higher levels of managerial ability enable firms to benefit more/less from their CSR investments depending on the presence/absence of appropriate governance devices. While CEO ability may be seen as an indicator of how well the CEO might serve the firm in the market-domain strategies, the results suggest that this may not be the case in the non-market domain in the absence of appropriate governance mechanisms. We discuss several theoretical and practical implications of our findings and suggest some directions for future studies that focus on the CEO ability. We also suggest that the market-based measures of CEO ability may need to incorporate other non-economic terms for the measure to be more reliable and comprehensive