The Causal Effect of Corporate Governance on Corporate Social Responsibility

Journal of Business Ethics 106 (1):53-72 (2012)
Abstract
In this article, we examine the empirical association between corporate governance (CG) and corporate social responsibility (CSR) engagement by investigating their causal effects. Employing a large and extensive US sample, we first find that while the lag of CSR does not affect CG variables, the lag of CG variables positively affects firms’ CSR engagement, after controlling for various firm characteristics. In addition, to examine the relative importance of stakeholder theory and agency theory regarding the associations among CSR, CG, and corporate financial performance (CFP), we also examine the relation between CSR and CFP. After correcting for endogeneity bias, our results show that CSR engagement positively influences CFP, supporting the conflict-resolution hypothesis based on stakeholder theory, but not the CSR overinvestment argument based on agency theory. Furthermore, firms’ CSR engagement with the community, environment, diversity, and employees plays a significantly positive role in enhancing CFP.
Keywords Corporate social responsibility  Corporate governance  Corporate financial performance  Conflict resolution
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    References found in this work BETA
    Archie B. Carroll (2003). Corporate Social Responsibility. Business Ethics Quarterly 13 (4):503-530.

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    Paul C. Godfrey, Nile A. Hatch & Jared M. Hansen (2005). Corporate Social Responsibility. Proceedings of the International Association for Business and Society 16:112-117.
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