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Cross-ownership and strategic environmental corporate social responsibility under price competition

Published online by Cambridge University Press:  11 March 2024

Mingqing Xing  and
Sang-Ho Lee Open the ORCID record for Sang-Ho Lee [Opens in a new window]
Mingqing Xing
Affiliation:
School of Economics and Management, Weifang University, Weifang, China
Sang-Ho Lee*
Affiliation:
Graduate School of Economics, Chonnam National University, Gwangju, Republic of Korea
*
*Corresponding author. E-mail: [email protected]
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Abstract

This paper examines the impact of cross-ownership on the strategic incentive of environmental corporate social responsibility (ECSR) within a green managerial delegation contract in a triopoly market engaged in price competition. It demonstrates that bilateral cross-ownership between insiders provides weak incentives to undertake ECSR, which has a non-monotone relationship with cross-ownership shares, while it provides strong incentives for outsiders, which increases the ECSR level as cross-ownership increases. It also compares unilateral cross-ownership and finds that a firm that owns shares in its rival has a greater incentive to undertake ECSR than its partially-owned rival, while an outsider has more incentive than firms in bilateral scenarios. These findings reveal that a firm's incentive to increase a market price through ECSR critically depends on its cross-ownership share, while it decreases environmental damage and increases social welfare when the environmental damage is serious.

Keywords

bilateral cross-ownershipcross-ownershipenvironmental corporate social responsibilityprice competitiontriopoly marketunilateral cross-ownership

JEL classification

M14: Corporate Culture • Diversity • Social Responsibility H23: Externalities • Redistributive Effects • Environmental Taxes and Subsidies L13: Oligopoly and Other Imperfect Markets
Type
Research Article
Information
Environment and Development Economics , Volume 29 , Issue 3 , June 2024 , pp. 234 - 256
Copyright
Copyright © The Author(s), 2024. Published by Cambridge University Press

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