CEOs' early famine experience, managerial discretion and corporate social responsibility

Corporate social responsibility (CSR) is increasingly recognized as crucial for sustainable development. While factors like ownership structure, resources, stakeholders, and environmental dynamics influence CSR, the CEO's role as the primary decision-maker is paramount. Upper echelons theory suggests that CEOs' characteristics, including life experiences, significantly shape strategic decisions. Prior research has explored the impact of various CEO experiences (military service, tenure, overseas experience, etc.) on CSR, but the influence of early famine experience remains under-researched and presents conflicting findings – some showing negative and others positive correlations. This study aims to address this gap by examining the impact of CEO's early famine experience on CSR in Chinese manufacturing listed companies from 2010-2019, using imprinting theory and upper echelons theory to frame the investigation. The study explores the moderating effects of managerial discretion, considering environmental, organizational, and CEO-specific factors to gain a comprehensive understanding of the complex relationship.

Existing research highlights various factors influencing CSR performance, including corporate ownership, resources, stakeholder influence, firm size, industry, and environmental dynamics. However, the CEO's role as the key decision-maker in CSR strategies is undeniable. Upper echelons theory posits that executives' experiences, traits, and values significantly influence corporate decisions. Previous literature shows a link between CSR and executive values, life experiences, military service, tenure, and other personal characteristics. While prior research agrees that early experiences shape managerial behavior, studies on the relationship between CEO's early famine experience and CSR have yielded conflicting results. This research aims to reconcile these conflicting findings and delve deeper into the nuanced relationship, exploring potential moderating factors.

This study utilizes a sample of Chinese manufacturing listed companies from 2010 to 2019. Companies with specific financial statuses (S, ST, *ST, S*ST, PT) and those with incomplete data were excluded, resulting in an unbalanced panel of 396 companies with 2202 observations. CSR performance was measured using RKS's CSR report ratings, a third-party assessment based on the GRI framework and incorporating China-specific elements. The independent variable, CEO's early famine experience (CFE), was determined based on the CEO's birth year (1947-1961, considered the period of the Great Chinese Famine). Moderating variables included: market abundance (coefficient of variation of industry sales revenue), organizational slack resources (equity-debt ratio), and CEO concurrently (dummy variable for CEOs also holding the chairman position). Control variables encompassed firm-level factors (size, age, capital structure, market share, profitability, growth, equity nature) and CEO-level factors (gender, age, education, turnover). The study employed regression analysis (OLS and system GMM) to test hypotheses and robustness. Descriptive statistics and correlation analysis were also conducted.

The study's key findings confirm a significant positive relationship between CEO's early famine experience and CSR performance (H1). CEOs who experienced the famine demonstrate a greater commitment to CSR. This finding supports imprinting theory, suggesting that early hardships shape values and decision-making. Market abundance (H2) and organizational slack resources (H3) positively moderate the relationship between CFE and CSR, indicating that ample resources enhance the positive impact of famine experience on CSR initiatives. Conversely, CEO concurrently (H4) negatively moderates the relationship. When CEOs hold dual roles (CEO and chairman), the positive effect of CFE on CSR weakens, potentially due to reduced accountability and checks and balances. Robustness checks using system GMM, instrumental variables (famine-affected population), alternative CSR measures, and different CFE time windows largely supported the initial findings. Further heterogeneity analysis revealed significant variations. The positive effect of CFE on CSR is stronger in state-owned enterprises (SOEs), for male CEOs, and for CEOs with lower education levels. The positive impact is weaker when the CEO has experienced a turnover, suggesting that organizational experience and continuity play a pivotal role.

The findings address the research question by demonstrating a significant and nuanced relationship between CEO's early famine experience and CSR performance. The positive correlation between CFE and CSR aligns with imprinting theory and suggests that traumatic experiences can lead to a greater appreciation for societal well-being and a stronger sense of responsibility. The moderating effects of managerial discretion highlight the contextual factors influencing this relationship. The positive moderating roles of market abundance and organizational slack resources indicate that favorable environmental and internal conditions are necessary for translating CFE into robust CSR actions. The negative moderating role of CEO concurrently emphasizes the importance of governance structures in ensuring effective CSR implementation. The heterogeneity analysis underscores the importance of considering individual and organizational factors in understanding the relationship between CFE and CSR.

This study makes several contributions. First, it demonstrates the positive influence of CEO's early famine experience on CSR, adding to the understanding of how personal experiences affect corporate strategy. Second, it reveals the moderating roles of environmental and organizational discretion, and CEO discretion, providing crucial contextual insights. Third, heterogeneity analysis highlights specific demographics that influence the relationship. Future research could expand the sample to include non-listed firms and extend the time frame for more robust analysis. Investigating the impact of leadership styles on the observed relationship would also be valuable. Moreover, exploring how different cultural contexts might influence the link between CFE and CSR could lead to a more comprehensive understanding of the phenomenon.

This study's limitations include the use of data from Chinese manufacturing listed companies, potentially limiting generalizability to other sectors or countries. The ten-year sample period may not fully capture long-term trends. While the study attempts to control for potential confounders, omitted variable bias remains a possibility. Further research should address these limitations by expanding the sample, extending the time horizon, and including additional control variables. The absence of data on certain companies, like Huawei, is another limitation.