Based on a large international sample, we show how decision-making power of CEOs in conjunction with prevailing institutional discretion relates to corporate resources allocated towards CSR strategy. First, especially in environments with greater institutional discretion, powerful CEOs pursue exaggerated CSR strategies aiming at reputational gains for their private benefit, while not necessarily bearing the costs of their decisions. Second, such CEO induced CSR enhancements prove to be defective CSR overinvestment entailing a decrease in firm value. By complementing organizational factors with institutional factors, we succeed to overcome contradicting empirical evidence regarding a significant CEO effect, and show a conditional relation between CEO power and the CSR choice. Our results are robust to alternative variable definitions, sample composition, and various methodological specifications.

WOLFGANG BREUER, Aachen University – Department of Finance Email: DAVID JOHANNES ROSENBACH, RWTH Aachen University – Department of Finance Email:

See the SSRN article here