Corporate Governance and Corporate Social Responsibility—Introduction

Abstract

Corporate governance reform has emerged as a critical business and economic issue at the global level followed by a number of high profile corporate failures. At the same time, as early as 2005, the international economic press acknowledged the growth of Corporate Social Responsibility (CSR) initiatives of the world organisations. This chapter introduces and motivates the research framework to analyse the interaction between corporate governance and CSR and describes the objectives and contribution of this study as follows. First the study presents an extensive literature survey focusing on the interdisciplinary nature of the aforementioned research question. Second the study develops the empirical framework to account for sample selection bias and measurement errors pervasive in most of the existing studies on CSR and corporate governance. Finally, using the empirical framework the CSR score is obtained and tested on out of sample companies to predict the probability of a firm being classified into a particular range of CSR among – no CSR, low CSR, medium CSR and high CSR – respectively.