Managerial entrenchment and corporate social responsibility engagement: the role of economic policy uncertainty

The behavioral theory of corporate governance is employed to investigate the relationship between managerial entrenchment and corporate social responsibility (CSR) engagement. Effective corporate governance is argued to reduce managerial entrenchment, thereby increasing CSR engagement. The role of economic policy uncertainty (EPU) is investigated as a moderating variable in this relationship, such that high levels of EPU will increase the impact of entrenchment on CSR engagement. These arguments are supported using a panel of 386 US firms from 2011 to 2018 representing 3,088 firm-year observations in a variety of industries. In supplementary analysis, the CSR measure is disaggregated in order to provide further insight regarding these relationships as they pertain to the individual CSR dimensions under study. Findings inform research regarding the entrenchment-CSR link in particular environmental contexts. Practical implications include potential governance guidelines for boards of directors; stakeholder management given the policy environment; and the impact of government decisions as they affect policy uncertainty, firm actions, and CSR engagement.