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Aligning Incentives for Social Responsibility: Evidence From Performance‐Contingent Equity Awards

Xudong Fu & Tian Tang

Financial Review (US)2026https://doi.org/10.1111/fire.70054article
AJG 3ABDC A
Weight
0.50

Abstract

This paper examines the relation between CEO performance‐contingent (p‐c) incentive contracts and Corporate Social Responsibility (CSR). Drawing on contrasting instrumental and agency cost perspectives, we investigate whether p‐c equity awards incentivize managers to engage in CSR activities that enhance firm performance and value. Our findings indicate that p‐c equity awards are positively associated with CSR engagement, reflected in both improved strengths and reduced concerns. Moreover, these awards effectively motivate CEOs to undertake value‐enhancing CSR initiatives. Using exogenous event of FAS 123‐R adoption, instrumental variable approaches, dynamic GMM, and firm‐level fixed effects, we confirm the robustness of these results. Additional tests reveal that the effects are stronger in firms that require greater stakeholder support, have stronger corporate governance, and face lower information asymmetry. Overall, our study suggests that incorporating p‐c equity awards into CEO compensation structures helps align the interests between managers and shareholders and fostering a synergistic relation between shareholder wealth and societal well‐being.

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https://doi.org/https://doi.org/10.1111/fire.70054

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@article{xudong2026,
  title        = {{Aligning Incentives for Social Responsibility: Evidence From Performance‐Contingent Equity Awards}},
  author       = {Xudong Fu & Tian Tang},
  journal      = {Financial Review (US)},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1111/fire.70054},
}

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Aligning Incentives for Social Responsibility: Evidence From Performance‐Contingent Equity Awards

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.