Corporate social responsibility and firm performance nexus: Moderating role of CEO chair duality

PLOS ONE RESEARCH ARTICLE Corporate social responsibility and firm performance nexus: Moderating role of CEO chair duality Wasim Nasir1, Arshad Hassan ID1, Mushtaq Hussain Khan ID2* 1 Faculty of Management & Social Sciences, Capital University of Science and Technology, Islamabad, Pakistan, 2 Cardiff School of Management, Cardiff Metropolitan University, Cardiff, United Kingdom a1111111111 a1111111111 a1111111111 a1111111111 a1111111111 OPEN ACCESS Citation: Nasir W, Hassan A, Khan MH (2023) Corporate social responsibility and firm performance nexus: Moderating role of CEO chair duality. PLoS ONE 18(8): e0289037. https://doi. org/10.1371/journal.pone.0289037 Editor: José Manuel Santos Jaén, University of Murcia: Universidad de Murcia, SPAIN Received: May 4, 2023 Accepted: July 10, 2023 Published: August 3, 2023 Peer Review History: PLOS recognizes the benefits of transparency in the peer review process; therefore, we enable the publication of all of the content of peer review and author responses alongside final, published articles. The editorial history of this article is available here: https://doi.org/10.1371/journal.pone.0289037 Copyright: © 2023 Nasir et al. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. Data Availability Statement: The dataset used in this study has been uploaded as Supporting information file. Funding: This research is funded by Cardiff Metropolitan University, UK under the PLOS * Abstract This study aims to explore the link between corporate social responsibility (CSR) and firm performance in the presence of the moderating role of CEO chair duality. It is widely believed that CSR initiatives and firm performance are largely influenced by psychological factors and the behavior of the decision maker (manager/CEO). Hence, CEO chair duality may play an instrumental role in shaping CSR initiatives to enhance firm performance. For empirical investigation, the study used the dynamic panel data method with generalized method of moment (GMM) parameters. The study considered 131 firms listed on the Pakistan Stock Exchange (PSX), yielding 1508 firm-year observations, over the period 2006 to 2020. Our results reveal that the impact of CSR on book-based and market-based measures differs due to the asymmetry of information in the market. The market discounts CEO chair duality due to the concentration of power and translates it into negative impact of CSR on firm performance. Thus, firms should not only improve CSR activities but also take steps to reduce asymmetry in markets because the impact on book-based measures and marketbased measures of performance are not consistent. Society should also play a role to convince firms in a better way to take CSR initiatives. The perception of transparency should also be improved as CEO chair duality is being negatively seen by the market. Introduction Corporate social responsibility (CSR) plays a key role in reshaping the corporate landscape. Corporate social responsibility is an instrument that assists firms in incorporating their voluntary social and environmental commitments into their operations and interactions with stakeholders. It is not just following regulations with a minimal approach. It is one step forward toward involving in answering the social needs of the stakeholders. This requires resource allocation in the development of human and environmental capital. Therefore, companies go beyond the minimum regulatory responsibilities and synchronize their economic interest with social and environmental interests. Therefore, companies think and exhibit socially responsible behavior for both moral and practical business motives. The supporters of socially responsible behavior highlight the benefits that companies can derive in the form of improved PLOS ONE | https://doi.org/10.1371/journal.pone.0289037 August 3, 2023 1 / 10 PLOS ONE Institutional Account Program. No additional external funding was received for this study. The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript. Competing interests: The authors have declared that no competing interests exist. Corporate social responsibility and firm performance nexus financial performance. This stream of literature opens the doors for the area of research that connects business and society. This area investigates the relationship between corporate social conduct and firm performance in the context of both the corporation’s stakeholders and society. Existing studies, for instance, McWilliams and Siegel [1] discuss and testify to the dichotomy between corporate social responsibility and firm performance but there is no consensus about the positive, negative, or no relationship. There are many reasons for such a mixed result. Some of these lies in the imperfections regarding the measurement of financial performance and corporate social responsibility, the omission of variables, confusion about the direction of causality, the lack of rigor in the statistical approach used, and inconsistency in the underpinning theory [2]. The debate has inconsistent arguments. The proponents of corporate social responsibility state that CSR has a positive impact on financial performance. The critics argue CSR involves unnecessary costs that reduce profitability. Therefore, the literature in this domain is very diversified. There is a conflicting theoretical framework. The debate has two major perspectives. The studies that consider CSR assignments as an investment and studies that consider these as an agency cost. Freeman [3] was the first to introduce the concept of stakeholder theory. This theory is a fundamental perspective used to conceptualize the connection between corporate social responsibility (CSR) and performance. Research studies that adopt the stakeholder theory viewpoint investigate the correlation between stakeholder management and its influence on the performance of a company [4]. Jones [5] developed an instrumental theory that combines stakeholder theory, economic theory, and ethical standards. The study suggests that markets are competitive and discipline the behavior of firms through a pricing mechanism, so firms are forced to exercise instrumental stakeholder management to attain a competitive edge. The positive relationship between CSR and firm performance has been discussed under the social impact hypothesis which asserts that supporters of the stakeholder theory believe that favorable social performance in the form of meeting the expectations of stakeholders leads to favorable firm performance and vice versa [6]. According to Friedman [7], companies with robust social credentials tend to see a decrease in their stock prices compared to the market average. The trade-off hypothesis, introduced (...truncated)