Unpacking CEO Power: A Comprehensive Analysis of its Impact on Corporate Social Responsibility and Firm Value

Abstract

This research delves into the dynamic interplay between CEO power, Corporate Social Responsibility (CSR), and firm value with a focus on exploring the implications of agency theory. The primary objective is to evaluate the presence of agency theory’s overinvestment hypothesis within the context of Pakistani non-financial firms. To scrutinize this complex relationship, the study leveraged a dataset comprising annual reports from 150 Pakistani non-financial companies spanning a five-year period from 2011 to 2015. Through rigorous analysis, combining logistic regression and panel data regression techniques, the research set out to ascertain how CSR and firm value are intertwined with CEO power. The analytical framework employed in this investigation utilized Stata, a robust statistical software package, to elucidate the multifaceted relationship among these key variables. The results derived from both the logistic regression and panel data regression analyses yielded intriguing findings. Contrary to the expectations derived from the overinvestment hypothesis of agency theory, the research reveals a notable absence of a significant relationship between CEO power and CSR. Furthermore, the study also uncovers a similar insignificance in the relationship between CSR and firm value. These outcomes challenge prevailing notions and provoke contemplation on the complexities inherent in understanding the dynamics of corporate governance, social responsibility, and financial performance in the context of Pakistani non-financial firms. In summary, this study enhances our comprehension of the intricate interplay between CEO power, CSR, and firm value and offers a nuanced perspective on the application of agency theory in the Pakistani corporate landscape. The results pave the way for further research and deeper explorations into the underlying mechanisms governing these relationships.