Abstract
This paper investigates the influence of board network centrality on corporate social responsibility (CSR) decoupling. CSR decoupling refers to the gap between corporate internal and external actions in CSR practices. Specifically, we measure CSR decoupling as the difference between corporate social disclosure (CSD) and corporate social performance (CSP). This paper uses a sample of Chinese A-share listed firms during 2009–2018, takes the technical dimension score (T-score) and content dimension score (C-score) of RKS ratings as proxies of CSD and CSP, and obtains CSR decoupling as the difference between CSD and CSP. Our results show that (1) board network centrality is positively related to over-decoupling in the pre-adoption period (2009–2014) of the new environmental law but negatively related to over-decoupling in the post-adoption period (2015–2018) and (2) centrality is not related to under-decoupling in the pre-adoption period but a significantly positive related in the post-adoption period. Our finding reveals a complex role of the board network in CSR practices in China.
Highlights
Previous studies based on network theory find that social networks built by top managers, e.g., CEOs and directors, affect corporate financing, investment, and other traditional business practices (Chuluun et al, 2014; Feng et al, 2019) and corporate social responsibility (CSR) practices
The Chinese legislature carried out a major amendment to the Environmental Protection Law of China in April 2014, which significantly enhanced the law enforcement authority of environmental protection departments, expanded and strengthened the scope and quality of mandatory information disclosure (Zhang et al, 2017), it has become an important signal of the improvement of the Chinese CSR regulatory system (Yu et al, 2021)
We reveal the complex role of the board network in CSR practices in China: (1) when the CSR institutional regulation is weak, board network centrality is positively related to over-decoupling but not related to under-decoupling and (2) when the regulation get strengthening, board network centrality is negatively related to over-decoupling
Summary
Previous studies based on network theory find that social networks built by top managers, e.g., CEOs and directors, affect corporate financing, investment, and other traditional business practices (Chuluun et al, 2014; Feng et al, 2019) and corporate social responsibility (CSR) practices. Harjoto and Wang (2020), Lai et al (2020), and Nandy et al (2020) find that boards with higher network centrality can bring social capital to the firm and stronger advantages in information access and exchange, which helps firms to improve corporate social performance (CSP). These studies implicitly assume that the firm discloses its CSP truthfully and no misalignment between its CSP and corporate social disclosure (CSD). A research question is generated: do firms use their advantages of board networks to increase or decrease the misalignment between CSD and CSP, the positive or negative gap between CSR disclosure and
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