Abstract
•This study discusses the relationship between CEO inside debt and CSR.•An increase in CEO inside debt leads to high levels of CSR.•CEO inside debt relates to firms’ primary stakeholders: Community, Diversity, Employee Relations, Environment, and Product Characteristics.
This study provides evidence on the relationship between CEO inside debt and corporate social responsibility (hereinafter, CSR). We find that an increase in CEO inside debt leads to high levels of CSR. This finding is robust to controlling for the sensitivity of CEO equity compensation to volatility as well as to alternative measures of CSR. We also find that CEO inside debt is directly related to firms’ primary stakeholders (Community, Diversity, Employee Relations, Environment, and Product Characteristics). Our results are in line with the risk mitigation hypothesis and shed more light on CSR as a channel through which managers with more inside debt tend to respond to debtholders’ demands as their appetite for risk decreases.