The Dark Side of CSR : Is a firm’s social responsibility caused by agency problems?

Sammanfattning: It is claimed that Swedish firms are at the forefront of integrating sustainability into their businesses. This study assesses whether a relationship between Corporate social responsibility (CSR) activities and managerial agency problems exists in Swedish listed firms. The rationale of the study lies on whose preferences are fulfilled and if these activities are caused by incentives to maximize shareholders’ value or by incentives to extract managers’ personal benefits. An ordinary least squares (OLS) fixed-effects panel regression is conducted to investigate this relationship where the results show an insignificant and mostly positive relationship between CSR activities and the managerial agency problems as measured by the Environmental, social and governance (ESG) score. Therefore, we are not able to reject nor confirm that CSR activities are driven by managerial agency problems. However, our findings are surprisingly also presenting a significant and negative estimate for Tobin’s Q and ROA. This implies that CSR activities are not caused by value-creating incentives for the shareholder. However, if CSR activities are caused by managerial agency problems or other reasons remains unconfirmed.