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

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 market-based 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.