Is managerial entrenchment always bad and corporate social responsibility always good? A cross¿national examination of their combined influence on shareholder value

Abstract

Building on the comparative capitalism's notion of institutional complementarities, we examine whether firms' simultaneous adoption of managerial entrenchment provisions (MEPs) and corporate social responsibility (CSR) reinforces or undercuts one another in influencing firm financial performance. We propose that the financial impact of such configurations is contingent on the country's institutional setting. In Liberal Market Economies (LMEs), where firms face strong pressures to achieve short‐term goals, the combination of MEPs and CSR creates shareholder value, particularly when firms engage in internally oriented CSR projects. Conversely, in Coordinated Market Economies (CMEs), where institutions already curb short‐term demands, the combined adoption of MEPs and CSR initiatives destroys shareholder value, particularly when this CSR is external. Overall, our study enhances understanding of the institutional complementarity between corporate governance and CSR.