Revisiting the Effect of Family Involvement on Corporate Social Responsibility: A Behavioral Agency Perspective



This paper sheds light on the incongruent findings concerning the relationship between family involvement and firms’ corporate social responsibility (CSR). While prior studies have mainly taken the perspective of families’ socioemotional wealth preservation, we approach this relationship from the perspective of behavioral agency theory, highlighting the important role played by CEOs’ family memberships. Specifically, we posit that family firms are more likely to invest in CSR when their CEOs are members of the controlling families. Furthermore, we examine how family firms can employ long-term incentives to encourage non-family CEOs to act in the interests of the controlling families to preserve SEW and thus enhancing family firms’ CSR performance. We tested our hypotheses using hand-collected data of family firms included in the S&P 500 index, in the period of 2003–2010. The empirical findings support our hypotheses that (a) family firms with family members as the CEOs have better CSR performance and (b) family firms tend to provide a high level of long-term incentives to non-family than family CEOs. In addition, long-term incentives strongly motivate CEOs to improve firms’ CSR performance, regardless of their family memberships.


Corporate social responsibility Family involvement Behavioral agency theory CEOs’ family membership Long-term incentives Socioemotional wealth 


  1. Aguilera, R. V., Rupp, D. E., Williams, C. A., & Ganapathi, J. (2007). Putting the S back in corporate social responsibility: A multilevel theory of social change in organizations. Academy of Management Review, 32, 836–863.CrossRefGoogle Scholar
  2. Aguinis, H. (2011). Organizational responsibility: Doing good and doing well. In S. Zedeck (Ed.), APA handbook of industrial and organizational psychology (Vol. 3). Washington, DC: American Psychological Association.Google Scholar
  3. Aldrich, H. E., & Cliff, J. E. (2003). The pervasive effects of family on entrepreneurship: Toward a family embeddedness perspective. Journal of Business Venturing, 18(5), 573–596.CrossRefGoogle Scholar
  4. Anderson, R., Mansi, S. A., & Reeb, D. M. (2003). Founding family ownership and the agency cost of debt. Journal of Financial Economics, 68, 263–285.CrossRefGoogle Scholar
  5. Anderson, R., & Reeb, D. (2003). Founding-family ownership and firm performance: Evidence from the SP 500. Journal of Finance, 58(3), 1301–1328.CrossRefGoogle Scholar
  6. Argote, L., & Greve, H. R. (2007). A behavioral theory of the firm-40 years and counting: Introduction and impact. Organization Science, 18(3), 337–349.CrossRefGoogle Scholar
  7. Astrachan, J. H., & Jaskiewicz, P. (2008). Emotional returns and emotional costs in privately held family businesses: Advancing traditional business valuation. Family Business Review, 21(2), 139–149.CrossRefGoogle Scholar
  8. Baiman, S. (1990). Agency research in managerial accounting: A second look. Accounting, Organizations and Society, 15(4), 341–371.CrossRefGoogle Scholar
  9. Banfield, E. C. (1958). The moral basis of a backward society (pp. 3–4). New York: Glencol.Google Scholar
  10. Bansal, P., & Roth, K. (2000). Why companies go green: A model of ecological responsiveness. Academy of Management Journal, 43(4), 717–736.CrossRefGoogle Scholar
  11. Berrone, P., Curz, C., Gómez-Mejía, L. R., & Larraza Kintana, M. (2010). Socioemotional wealth and corporate responses to institutional pressures: Do family-controlled firms pollute less? Administrative Science Quarterly, 55, 82–113.CrossRefGoogle Scholar
  12. Berrone, P., Fosfuri, A., & Gelabert, L. (2015). Does greenwashing pay off? Understanding the relationship between environmental actions and environmental legitimacy. Journal of Business Ethics. doi: 10.1007/s10551-015-2816-9.Google Scholar
  13. Berrone, P., & Gomez-Mejia, L. R. (2009). Environmental performance and executive compensation: An integrated agency-institutional perspective. Academy of Management Journal, 52(1), 103–126.CrossRefGoogle Scholar
  14. Blumentritt, T. P., Keyt, A. D., & Astrachan, J. H. (2007). Creating an environment for successful nonfamily CEOs: An exploratory study of good principals. Family Business Review, 20(4), 321–335.CrossRefGoogle Scholar
  15. Bushman, R., & Piotroski, J. (2006). Financial reporting incentives for conservative accounting: The influence of legal and political institutions. Journal of Accounting and Economics, 42(1–2), 107–148.CrossRefGoogle Scholar
  16. Carlson, D. S., Upton, N., & Seaman, S. (2006). The impact of human resource practices and compensation design on performance: An analysis of family-owned SMEs. Journal of Small Business Management, 44, 531–543.CrossRefGoogle Scholar
  17. Carter, M. E., Lynch, L. J., & Zechman, S. L. C. (2009). Changes in bonus contracts in the post-Sarbanes-Oxley era. Review of Accounting Studies, 14, 480–506.CrossRefGoogle Scholar
  18. Chang, K., Kim, I., & Li, Y. (2014). The heterogeneous impact of corporate social responsibility activities that target different stakeholders. Journal of Business Ethics, 125, 211–234.CrossRefGoogle Scholar
  19. Chava, S. (2014). Environmental externalities and cost of capital. Management Science, 60(9), 2223–2247.CrossRefGoogle Scholar
  20. Chen, S., Chen, X., Cheng, Q., & Shevlin, T. (2010). Are family firms more tax aggressive than non-family firms? Journal of Financial Economics, 45, 41–61.CrossRefGoogle Scholar
  21. Chen, H. L., & Hsu, W. T. (2009). Family ownership, board independence, and RandD investment. Family Business Review, 22, 347–362.CrossRefGoogle Scholar
  22. Chrisman, J. J., Chua, J. H., Kellermanns, F. W., & Chang, E. P. C. (2007). Are family managers agents or stewards: An exploratory study in privately held family firms. Journal of Business Research, 60, 1030–1038.CrossRefGoogle Scholar
  23. Chrisman, J., & Patel, P. (2012). Variations in R&D investments of family and non-family firms: Behavioral agency and myopic loss aversion perspectives. Academy of Management Journal, 55, 976–997.CrossRefGoogle Scholar
  24. Chua, J. H., Chrisman, J. J., Kellermanns, F. W., & Wu, Z. (2011). Family involvement and new venture debt financing. Journal of Business Venturing, 26, 472–488.CrossRefGoogle Scholar
  25. Chua, J. H., Chrisman, J. J., & Sharma, P. (1999). Defining the family business by behavior. Entrepreneurship Theory and Practice, 23, 19–39.Google Scholar
  26. Chua, J. H., Chrisman, J. J., Steier, L. P., & Rau, S. B. (2012). Sources of heterogeneity in family firms: An introduction. Entrepreneurship Theory and Practice, 36(6), 1103–1113.CrossRefGoogle Scholar
  27. Combs, J. G., Penney, C. R., Crook, T. R., & Short, J. C. (2010). The impact of family representation on CEO compensation. Entrepreneurship Theory & Practice, 34, 1125–1144.CrossRefGoogle Scholar
  28. Cyert, R. M., & March, J. G. (1963). A behavioral theory of the firm. NJ: Englewood Cliffs. 2.Google Scholar
  29. Daily, C. M., Johnson, J. L., Ellstrand, A. E., & Dalton, D. R. (1998). Compensation committee composition as a determinant of CEO compensation. The Academy of Management Journal, 41(2), 209–220.CrossRefGoogle Scholar
  30. Davis, J. H., Schoorman, F. D., & Donaldson, L. (1997). Toward a stewardship theory of management. Academy of Management Review, 22(1), 20–47.Google Scholar
  31. Dekker, J., & Hasso, T. (2014). Environmental performance focus in private family firms: The role of social embeddedness. Journal of Business Ethics, 136, 293–309.CrossRefGoogle Scholar
  32. Dhaliwal, D. S., Li, O., Tsang, Z. A., & Yang, Y. G. (2011). Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of corporate social responsibility reporting. The Accounting Review, 86(1), 59–100.CrossRefGoogle Scholar
  33. Dikolli, S. S., Mayew, W. J., & Nanda, D. (2014). CEO tenure and the performance-turnover relation. Review of Accounting Studies, 19, 281–327.CrossRefGoogle Scholar
  34. Ding, S., Wu, Z., & Ding, R. (2014). Family ownership and risk-taking in small business loan applications. Working paper.Google Scholar
  35. Dou, J., Zhang, Z., & Su, E. (2014). Does family involvement make firms donate more? Empirical evidence from Chinese private firms. Family Business Review, 27(3), 259–274.CrossRefGoogle Scholar
  36. Du, S., & Vieira, E. T., Jr. (2012). Striving for legitimacy through corporate social responsibility: Insights from oil companies. Journal of Business Ethics, 110(4), 413–427.CrossRefGoogle Scholar
  37. Dutton, J. E., Dukerich, J. M., & Harquail, C. V. (1994). Organizational images and member identification. Administrative Science Quarterly, 39, 239–263.CrossRefGoogle Scholar
  38. Dyck, I. J. A. (1997). Management entrenchment, reputation and ownership: The managerial labor market as a disciplinary device. Working paper, Harvard Business School, Division of Research.Google Scholar
  39. Dyer, W. G., & Whetten, D. A. (2006). Family firms and social responsibility: Preliminary evidence from the SandP 500. Entrepreneurship Theory and Practice, 30, 785–802.CrossRefGoogle Scholar
  40. Fama, E. F., & Macbeth, J. D. (1973). Risk and return: Empirical tests. Journal of Political Economics, 81(3), 607–636.CrossRefGoogle Scholar
  41. Fang, H., Randolph, R. V. D. G., Memili, E., & Chrisman, J. J. (2015). Does size matter? The moderating effects of firm size on the employment of nonfamily managers in privately held family SMEs. Entrepreneurship Theory and Practice. doi: 10.1111/etap.12156.Google Scholar
  42. Francis, J., Khurana, I., & Pereira, R. (2003). The role of accounting and auditing in corporate governance and the development of financial markets around the world. Asia-Pacific Journal of Accounting and Economics, 10(1), 1–30.CrossRefGoogle Scholar
  43. Ge, W., & Liu, M. (2015). Corporate social responsibility and the cost of corporate bonds. Journal of Accounting and Public Policy, 34, 597–624.CrossRefGoogle Scholar
  44. Gioia, D., Schultz, M., & Corley, K. (2000). Organizational identity, image and adaptive instability. Academy of Management Review, 20, 63–81.Google Scholar
  45. Gómez-Mejía, L. R., Haynes, K. T., Núñez-Nickel, M. K., Jacobson, J. L., & Moyano-Fuentes, J. (2007). Socioemotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills. Administrative Science Quarterly, 52, 106–137.Google Scholar
  46. Gómez-Mejía, L. R., Hoskisson, R. E., Makri, M., Sirmon, D. G., & Campbell, J. T. (2011). Innovation and the preservation of socioemotional wealth: The paradox of RandD investment in family controlled high technology firms. Unpublished manuscript, Mays Business School, Texas A&M University.Google Scholar
  47. Gómez-Mejía, L. R., Larraza-Kintana, M., & Makri, M. (2003). The determinants of executive compensation in family-controlled public corporations. Academy of Management Journal, 46, 226–237.CrossRefGoogle Scholar
  48. Gottman, J. M. (1981). Time-series analysis: A comprehensive introduction for social scientists. Cambridge: Cambridge University Press.Google Scholar
  49. Huitema, B. E., & McKean, J. W. (1991). Autocorrelation estimation and inference with small samples. Psychological Bulletin, 110(2), 291–304.CrossRefGoogle Scholar
  50. Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.CrossRefGoogle Scholar
  51. Johnson, R. A., & Greening, D. W. (1999). The effects of corporate governance and institutional ownership types on corporate social performance. Academy of Management Journal, 42(5), 564–576.CrossRefGoogle Scholar
  52. Kahneman, D., Knetsch, J. L., & Thaler, R. H. (1991). Anomalies: The endowment effect, loss aversion, and status quo bias. Journal of Economic Perspectives, 5, 193–206.CrossRefGoogle Scholar
  53. Kim, Y., Park, M. S., & Wier, B. (2012). Is earnings quality associated with corporate social responsibility? The Accounting Review, 87(3), 761–796.CrossRefGoogle Scholar
  54. Laffont, J. J., & Martimort, D. (2002a). The theory of incentives: The principal-agent model. Princeton and Oxford: Princeton University Press.Google Scholar
  55. Laffont, J. J., & Martimort, D. (2002b). The theory of incentives: The principal-agent problem. Princeton: Princeton University Press.Google Scholar
  56. Li, K. K., & Mohanram, P. (2014). Evaluating cross-sectional forecasting models for implied cost of capital. Review of Accounting Studies, 19(3), 1152–1185.CrossRefGoogle Scholar
  57. Loughran, T., & Ritter, J. R. (2000). Uniformly least powerful tests of market efficiency. Journal of Financial Economics, 55, 361–389.CrossRefGoogle Scholar
  58. Mahoney, L. S., & Thorne, L. (2005). Corporate social responsibility and long-term compensation: Evidence from Canada. Journal of Business Ethics, 57(3), 241–253.CrossRefGoogle Scholar
  59. Mahoney, L. S., & Thorne, L. (2006). An examination of the structure of executive compensation and corporate social responsibility: A Canadian investigation. Journal of Business Ethics, 69(2), 149–162.CrossRefGoogle Scholar
  60. Maignan, I., & Ferrell, O. C. (2000). Measuring corporate citizenship in two countries: The case of the United States and France. Journal of Business Ethics, 23(3), 283–297.CrossRefGoogle Scholar
  61. McConaughy, D. L. (2000). Family CEOs vs. nonfamily CEOs in the family controlled firm: An examination of the level and sensitivity of pay to performance. Family Business Review, 13, 121–131.CrossRefGoogle Scholar
  62. McGuire, J. (1988). Agency theory and organization analysis. Managerial Finance, 14, 6–9.CrossRefGoogle Scholar
  63. Meyer, J. W., & Scott, W. R. (1983). Centralization and the legitimacy problems of local government. In J. W. Meyer & W. R. Scott (Eds.), Organizational environments: Ritual and rationality (pp. 199–215). Beverly Hills: Sage.Google Scholar
  64. Michiels, A., Voordeckers, W., Lybaert, N., & Steijvers, T. (2012). CEO compensation in private family firms: Pay-for-performance and the moderating role of ownership and management. Family Business Review, 26, 140–160.CrossRefGoogle Scholar
  65. Morck, R., & Yeung, B. (2004). Family control and the rent-seeking society. Entrepreneurship Theory and Practice, 28(4), 391–409.CrossRefGoogle Scholar
  66. Munari, F., Oriani, R., & Sobrero, M. (2010). The effects of owner identity and external governance systems on R&D investments: a study of Western European firms. Research Policy, 39, 1093–1104.CrossRefGoogle Scholar
  67. Nagarajan, N. J., Sivaramakrishnan, K., & Sridhar, S. S. (1995). Managerial entrenchment, reputation and corporate investment myopia. Journal of Accounting, Auditing & Finance, 10(3), 565–585.Google Scholar
  68. Naldi, L., Cennamo, C., Corbetta, G., & Gomez-Mejia, L. (2013). Preserving socioemotional wealth in family firms: Asset or liability? The moderating role of business context. Entrepreneurship Theory and Practice, 37(6), 1341–1360.CrossRefGoogle Scholar
  69. Neubaum, D., & Zahra, S. (2006). Institutional ownership and corporate social performance: The moderating effect of investment horizon, activitism and coordination. Journal of Management, 32(1), 1–24.CrossRefGoogle Scholar
  70. Newey, W., & West, K. (1987). A simple, positive, semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix. Econometrica, 55, 703–708.CrossRefGoogle Scholar
  71. Palazzo, G., & Scherer, A. G. (2006). Corporate legitimacy as deliberation: A communicative framework. Journal of Business Ethics, 66(1), 71–88.CrossRefGoogle Scholar
  72. Panwar, R., Nybakk, E., Hansen, E., & Pinkse, J. (2015). Does the business case matter? The effect of a perceived business case on small firms’ social engagement. Journal of Business Ethics. doi: 10.1007/s10551-015-2835-6.Google Scholar
  73. Panwar, R., Paul, K., Nybakk, E., Hansen, E., & Thompson, D. (2014). The legitimacy of CSR actions of publicly traded companies versus family-owned companies. Journal of Business Ethics, 125(3), 481–496.CrossRefGoogle Scholar
  74. Petersen, M. (2009). Estimating standard errors in finance panel data sets: Comparing approaches. Review of Financial Studies, 22(1), 435–480.CrossRefGoogle Scholar
  75. Richardson, S., Sloan, R., Soliman, M., & Tuna, I. (2006). The implications of accounting distortions and growth in accruals and profitability. Accounting Review, 81(3), 713–748.CrossRefGoogle Scholar
  76. Riordan, M., & Sappington, D. (1987). Awarding monopoly franchises. American Economic Review, 77, 375–388.Google Scholar
  77. Sanders, W. G. (2001). Incentive alignment, CEO pay level, and firm performance: A case of “Heads I win, tails you lose”? Human Resource Management, 40(2), 159–170.CrossRefGoogle Scholar
  78. Schulze, W. S., Lubatkin, M. H., & Dino, R. N. (2002). Altruism, agency, and the competitiveness of family firms. Managerial and Decision Economics, 23, 247–259.CrossRefGoogle Scholar
  79. Schulze, W. S., Lubatkin, M. H., & Dino, R. N. (2003). Toward a theory of agency and altruism in family firms. Journal of Business Venturing, 18, 473–490.CrossRefGoogle Scholar
  80. Sharfman, M. P. (1996). The construct validity of the Kinder, Lydenberg & Domini social performance ratings data. Journal of Business Ethics, 15(3), 287–296.CrossRefGoogle Scholar
  81. Sharma, S. (2000). Managerial interpretations and organizational context as predictors of corporate choice of environmental strategy. Academy of Management Journal, 43(4), 681–697.CrossRefGoogle Scholar
  82. Sharma, P., & Sharma, S. (2011). Driveers of proactive environmental strategy in family firms. Business Ethics Quarterly, 21, 309–334.CrossRefGoogle Scholar
  83. Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance, 52, 737–783.CrossRefGoogle Scholar
  84. Sun, L., & Rakhman, F. (2013). CFO financial expertise and corporate social responsibility: Evidence from S&P 500 companies. International Journal of Law and Management, 55(3), 161–172.CrossRefGoogle Scholar
  85. Tosi, H. L., Katz, J. P., & Gomez-Mejia, L. R. (1997). Disaggregating the agency contract: The effects of monitoring, incentive alignment, and term in office on agent decision making. Academy of Management Journal, 40(3), 584–602.CrossRefGoogle Scholar
  86. Walls, J. L., Berrone, P., & Phan, P. H. (2012). Corporate governance and environmental performance: Is there really a link? Strategic Management Journal, 33(8), 885–913.CrossRefGoogle Scholar
  87. Wang, H., Choi, J., & Li, J. (2008). Too little or too much? Untangling the relationship between corporate philanthropy and firm financial performance. Organization Science, 19(1), 143–159.CrossRefGoogle Scholar
  88. Weber, J., Lavelle, L., Lowry, T., Zellner, W., & Barrent, A. (2003). Business Week (November 10, pp. 100–114). Family, Inc. Retrieved from
  89. Westhead, P., & Howorth, C. (2007). ‘Types’ of private family firms: An exploratory conceptual and empirical analysis. Entrepreneurship and Regional Development, 19(5), 405–431.CrossRefGoogle Scholar
  90. Wiseman, R. M., & Gómez-Mejía, L. R. (1998). A behavioral agency model of managerial risk taking. Academy of Management Review, 23, 133–153.Google Scholar
  91. Wu, Z., Chua, J. H., & Chrisman, J. J. (2007). Effects of family ownership and management on small business equity financing. Journal of Business Venturing, 22, 875–895.CrossRefGoogle Scholar
  92. Zellweger, T. M., & Astrachan, J. H. (2008). On the emotional value of owning a firm. Family Business Review, 21, 347–363.CrossRefGoogle Scholar
  93. Zellweger, T. M., Kellermanns, F. W., Chrisman, J. J., & Chua, J. H. (2012). Family control and family firm valuation by family CEOs: The importance of intentions for transgenerational control. Organization Science, 23, 851–868.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2016

Authors and Affiliations

  • Victor Cui
    • 1
  • Shujun Ding
    • 2
  • Mingzhi Liu
    • 1
  • Zhenyu Wu
    • 1
  1. 1.Asper School of BusinessUniversity of ManitobaWinnipegCanada
  2. 2.Telfer School of ManagementUniversity of OttawaOttawaCanada

Personalised recommendations