Corporate Citizenship and Firm Valuation: Exploring Beyond National Systems

Abstract

Scholars in management and economics have vigorously debated the relationship between business responsibilities and corporate performance over several decades. In this paper, we limit our attention to the conceptualization of corporate citizenship and empirically examine the effect that materializations in the form of corporate philanthropy undertaken within the community have on company performance. As organizations can be embedded in different institutional environments, we also explore the derived benefits, using as a moderator the legal system where they are embedded. Based on a sample of 769 multinational enterprises (MNEs) that subscribe to the OECD Guidelines and/or UN Global Compact and operate in developing countries, the findings reveal the existence of a positive relationship between corporate citizenship and the market value of the firm. In addition, those firms that leveraged corporate philanthropy and are primarily embedded in the common-law tradition benefit more than those operating in a civil-law system.