Top management team heterogeneity, corporate social responsibility and firm risk: an emerging country perspective

Abstract

Purpose

This study aims to examine the effects of top management team (TMT) heterogeneity and corporate social responsibility (CSR) on the firm risk of Bursa Malaysia listed firms. Also, this study examines the moderating effect of CSR between TMT heterogeneity and firm risk.

Design/methodology/approach

This study uses panel regression models to test the hypotheses. The sample of this study is Bursa Malaysia non-financial listed firms from 2013 to 2017 with 3,055 observations.

Findings

This study finds significant effects of TMT age and tenure heterogeneities on total risk. Effects on idiosyncratic risk are evident only within age heterogeneity. Further, this study finds negative effects of CSR on total and idiosyncratic risks. CSR significantly moderates the relationship between total TMT heterogeneity and firm systematic risk.

Practical implications

This study reduces the literature gap by providing useful insights on the effects of CSR activities and TMT heterogeneity on firm risk. The findings can also provide hints to investors to assist them in assessing firm risk based on TMT heterogeneity and firms’ CSR. This study can also benefit shareholders in their attempts to mitigate the risk of their portfolio by investing in firms that are socially responsible as firms with high CSR suffer lower total and idiosyncratic risks.

Originality/value

Previous studies have emphasised on the influence of TMT characteristics and CSR on firm performance. However, studies that investigate the effects of TMT heterogeneity and CSR on firm risk are limited in the context of Malaysia.

Citation

Shakil, M.H. and Abdul Wahab, N.S. (2023), "Top management team heterogeneity, corporate social responsibility and firm risk: an emerging country perspective", Journal of Financial Reporting and Accounting, Vol. 21 No. 2, pp. 434-463. https://doi.org/10.1108/JFRA-02-2021-0036