Browse > Article
http://dx.doi.org/10.13106/jafeb.2020.vol7.no8.297

Corporate Social Responsibility and the Pricing of Seasoned Equity Offerings: Does Executive Firm-Related Wealth Matter?  

PHAM, Hong Chuong (University Management Board, National Economics University)
NGO, Duc Anh (Department of Accounting, Finance and MIS, School of Business, Norfolk State University)
LE, Ha Thanh (Faculty of Environment, Climate Change and Urban Studies, National Economics University)
NGUYEN, Thiet Thanh (Accounting, Economics, and Finance Department, George Dean Johnson Jr. College of Business and Economics, University of South Carolina Upstate)
Publication Information
The Journal of Asian Finance, Economics and Business / v.7, no.8, 2020 , pp. 297-308 More about this Journal
Abstract
This study exemines the roles of corporate social activity (CSR) and executive compensation structure on the pricing of seasoned equity offerings (SEOs) with special focus on the role of CSR in reducing the level of information asymmetry between managers and future shareholders of issuing firms through SEOs. This study also investigates the interaction between executive compensation structure and CSR on the discounting of SEOs. We use a sample of 2,102 seasoned equity offerings of U.S. firms with CSR scores from 1995 to 2015 in our OLS fixed effect regression analysis. The results show that issuing firms with high CSR are more likely to expericence a lower degree of the SEO discount. The results also document a positive association between CSR and a high proportion of equity-based compensation of issuing firms' executives. The findings of this paper confirm that CSR attenuates the impact of information asymmetry and the pre-SEO price uncertainty on the pricing of the offers and hence the SEO discount. Furthermore, CSR reinforces the impact of executive firm-related wealth on the discounting of seasoned equity offerings. It appears that firm-related wealth motivates managers to actively engage in reducing information asymmetry activities before SEOs, thereby decreasing the SEO discount.
Keywords
Corporate Social Responsibility; Seasoned Equity Offerings; Executive Compensation Structure; Firm-Related Wealth;
Citations & Related Records
Times Cited By KSCI : 6  (Citation Analysis)
연도 인용수 순위
1 Datta, S., Iskandar-Datta, M., & Raman, K. (2005). Executive compensation structure and corporate equity financing decisions. Journal of Business, University of Chicago Press, 78(5), 1859-1890. https://doi.org/10.1086/431445   DOI
2 Edmans, A. (2011). Does the stock market fully value intangibles? Employee satisfaction and equity prices. Journal of Financial Economics, 101(3), 621-640. https://doi.org/10.1016/j.jfineco.2011.03.021   DOI
3 Feng, Z. Y., Chen, C. R., & Tseng, Y. J. (2018). Do capital markets value corporate social responsibility? Evidence from seasoned equity offerings. Journal of Banking and Finance. 94(C), 54-74. https://doi.org/10.1016/j.jbankfin.2018.06.015   DOI
4 Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360. https://doi.org/10.1016/0304-405X(76)90026-X   DOI
5 Kim, Y., & Park, M. S. (2005). Pricing of seasoned equity offers and earnings management. Journal of Financial and Quantitative Analysis, 40(2), 435-463. https://doi.org/10.1017/s0022109000002374   DOI
6 Kim, Y., Park, M. S., & Wier, B. (2012). Is earnings quality associated with corporate social responsibility? Accounting Review, 87(3), 761-796. https://doi.org/10.2308/accr-10209   DOI
7 Lins, K. V., Servaes, H., & Tamayo, A. (2017). Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis. Journal of Finance, 72(4), 1785-1824. https://doi.org/10.1111/jofi.12505   DOI
8 Mola, S., & Loughran, T. (2004). Discounting and Clustering in Seasoned Equity Offering Prices. Journal of Financial and Quantitative Analysis, 39(01), 1-23. https://doi.org/10.1017/S0022109000003860   DOI
9 Myers, S. C., & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187-221. https://doi.org/10.1016/0304-405X(84)90023-0   DOI
10 Sundaram, R. K., & Yermack, D. L. (2007). Pay me later: Inside debt and its role in managerial compensation. Journal of Finance, 62(4), 1551-1588. https://doi.org/10.1111/j.1540-6261.2007.01251.x   DOI
11 Yang, H. C., & Kim, Y. E. (2018). The effects of corporate social responsibility on job performance: Moderating effects of authentic leadership and meaningfulness of work. Journal of Asian Finance, Economics and Business, 5(3), 121-132. https://doi.org/10.13106/jafeb.2018.vol5.no3.121   DOI
12 Yoon, B., & Lee, J. H. (2019). Corporate social responsibility and information asymmetry in the Korean market: Implications of chaebol affiliates. Journal of Asian Finance, Economics and Business, 6(1), 21-31. https://doi.org/10.13106/jafeb.2019.vol6.no1.21   DOI
13 Chatterji, A. K., Levine, D. I., & Toffel, M. W. (2009). How well do social ratings actually measure corporate social responsibility? Journal of Economics and Management Strategy, 18(1), 125-169. https://doi.org/10.1111/j.1530-9134.2009.00210.x   DOI
14 Core, J., & Guay, W. (2002). Estimating the value of employee stock option portfolios and their sensitivities to price and volatility. Journal of Accounting Research, 40(3),613-630. https://doi.org/10.1111/1475-679X.00064   DOI
15 Corwin, S. A. (2003). The determinants of underpricing for seasoned equity offers. Journal of Finance, 48(5), 2249-2279. https://doi.org/10.1111/1540-6261.00604   DOI
16 Altinkilic, O., & Hansen, R. S. (2003). Discounting and underpricing in seasoned equity offers. Journal of Financial Economics, 69(2), 285-323. https://doi.org/10.1016/S0304-405X(03)00114-4   DOI
17 Black, F., & Scholes, M. (1973). The pricing of options and corporate liabilities. Journal of Political Economy, 81(3), 637-654. https://doi.org/10.1086/260062   DOI
18 Brazel, J. F., & Webb, E. (2006). CEO compensation and the seasoned equity offering decision. Managerial and Decision Economics, 27, 363-378. https://doi.org/10.1002/mde.1268   DOI
19 Brisker, E. R., Autore, D. M., Colak, G., & Peterson, D. R. (2014). Executive compensation structure and the motivations for seasoned equity offerings. Journal of Banking and Finance, 40, 330-345. https://doi.org/10.1016/j.jbankfin.2013.12.003   DOI
20 Carlson, M., Fisher, A., & Giammarino, R. (2010). SEO risk dynamics. Review of Financial Studies, 23, 4026-4077. https://doi.org/10.1093/rfs/hhq083   DOI
21 Zahari, A. R., Esa, E., Rajadurai, J., Azizan, N. A., & Tamyez, P. F. M. (2020). The effect of corporate social responsibility practices on brand equity: An examination of malaysia's top 100 brands. Journal of Asian Finance, Economics and Business, 7(2), 271-280. https://doi.org/10.13106/jafeb.2020.vol7.no2.271   DOI