The influence of CEOs’ equity-based compensation on restaurant firms’ CSR initiatives: The moderating role of institutional ownership

Purpose: Based on the agency theory and risk management perspective, this study aims to examine the relationship between CEOs’ pay schemes and corporate social responsibility (CSR) activities in the restaurant industry. Specifically, the authors propose that CEOs with a higher proportion of equity-based compensation (EBC), which induces a greater propensity for risk-taking, are prone to indulge less in CSR. In addition, the authors investigate how institutional ownership moderates the proposed main relationship. Design/methodology/approach: This study performs two-way fixed-effects models and clustered standard errors to test the proposed hypotheses. Findings: The results of the panel analysis show a significant negative effect of CEOs’ EBC on CSR. Also, the authors found a significant positive moderating effect of institutional ownership between CEOs’ EBC and CSR. Originality/value: Given the lack of empirical studies that incorporate both agency theory and the risk management perspective, and given the importance of understanding the determinants of restaurant firms’ CSR activities, this study expands upon the existing literature by showing the relationship between CEOs’ compensation schemes and restaurant firms’ CSR activities.