Corporate Governance Mechanisms and CSR Performance: A Systematic Review of Empirical Evidence

We investigate the association between corporate tax avoidance and corporate social responsibility (CSR) performance as well as the moderation effect of CSR performance consistency, using samples from South Korea. The baseline regression result suggests that there is a negative association between corporate tax avoidance and CSR performance among South Korean firms. However, as extant empirical studies find inconsistent evidence on the relationship and also the corporate culture theory suggests that the relationship could be non-monotonic and consistency is a important element to be considered in the model, we separated samples into two groups based on CSR performance, and re-examined the relationship with interaction term of CSR performance and CSR consistency as explanatory variable. Our empirical evidence suggests that tax avoidance is negatively associated with CSR performance for a high CSR performance group, whereas tax avoidance is positively associated with CSR performance for a low CSR performance group. Furthermore, our regression results indicate that a firm’s tax avoidance is negatively associated with the firm’s consistently high CSR performance, while a firm’s tax avoidance is positively associated with consistently low CSR performance.

PurposeThis study aimed to investigate the effect of sustainability committee (SC) characteristics (size, independence, the number of meetings, and expertise) on corporate social responsibility (CSR) performance in the Indian context.Design/methodology/approachThis research measures the CSR performance of 60 Indian non-financial firms listed on the Bombay Stock Exchange (BSE) over the period 2014 to 2019 using the ASSET4 environmental, social, and governance database. The authors resorted to fixed-effect panel regressions to capture the individual effect present in the data.FindingsThe results show that CSR performance is positively and significantly influenced by SC independence, size, and expertise. However, the number of SC meetings does not affect CSR performance. The results also demonstrate that CSR performance is positively and significantly associated with board independence.Research limitations/implicationsThis paper adds to the existing literature by examining the effect of SC characteristics on the firms' CSR performance in India as one of the oldest stock markets in the world, which would help test the validity of the agency and stakeholder theories in an old and big emerging market context.Practical implicationsThe findings allow managers to understand the mechanisms affecting CSR performance and how the characteristics of the SC can participate in its growth and development. Moreover, this study has implications for researchers, suggesting that future CSR studies should take into account the SC characteristics as potential determinants that explain CSR, such as CSR activities and CSR practices and strategies.Originality/valueThe present research contributes to the literature by investigating the effect of SC characteristics on the firms' CSR performance, thereby providing additional evidence on the issue. Several previous studies have examined the link between corporate governance and CSR performance with a focus on external oversight mechanisms, namely institutional ownership or analyst coverage or internal oversight mechanisms, such as board gender composition, board independence, separation of board Chairperson and CEO roles, and the existence of SC on the board, but these studies did not examine the SC characteristics. The present research fills the gap.

This article studies how financial investors respond to firms’ corporate social responsibility (CSR) performance in terms of their investing behaviors, and how such behaviors change contingent on an event that provokes their attention and concerns to CSR. Using the melamine contamination incident in China as a natural experiment, it is found that neither the individual investors’ nor the institutional investors’ behaviors are influenced by firms’ CSR performance before the incident. Nevertheless, in the post-event period, institutional investors’ behaviors are significantly influenced by firms’ CSR performance that exceeds a certain threshold. Furthermore, such an effect diminishes for a better CSR performance. In comparison, the authors do not find any effects of CSR performance on individual investors, either before the event or after the event. Finally, firms’ performance and investors’ behaviors jointly affect firms’ stock returns after the event but not before the event. This article reconciles the mixed findings in the literature on the effect of firms’ CSR performance on their financial performance by showing that such an effect exists in a contingent manner. Furthermore, the authors show that a too low or a too high CSR performance could lead to undesirable responses from investors. Therefore, managers should pay attention to optimizing firms’ CSR activities.

Purpose This study aims to investigate the association between corporate social responsibility (CSR) performance and the cost of debt financing (CODF) in Malaysia. It further explores whether the potential impact of CSR performance on debt pricing is moderated by the females’ representation on board and female directors’ foreign experience. Design/methodology/approach The authors use a sample of 845 firm-year observations from 2017 to 2021 and apply various regression techniques, including the pooled ordinary least squares (POLS), the Heckman two-stage self-selection model, propensity score matching (PSM) and quantile regression, to test the study’s hypotheses. Findings The results show that socially responsible firms incur lower costs of debt. Similarly, female directors and female directors with foreign exposure are negatively associated with CODF. However, their impact becomes positive when these two variables are interacted with CSR performance. The study findings are robust across alternative measures of board gender diversity, different model specifications and approaches addressing the endogeneity problem. In additional analyses, we find that the positive implication of CSR on CODF is more pronounced for firms with higher CSR performance and less financial constraint. Nevertheless, the results reveal that only firms with lower CSR performance but a high proportion of female directors and female directors with foreign experience exhibit lower CODF. This underscores the likelihood that female directors and their foreign exposure may substitute CSR practices in mitigating the cost of debt. Originality/value Existing literature generally emphasises the importance of CSR performance to corporate financing decisions, often neglecting the role of female directors and their attributes in financial institutions’ creditworthiness evaluation. This study is among the first to address this gap by examining the moderating effect of female directors and their characteristics on CSR–CODF relationship within an emerging economy context. The findings contribute to the literature on CSR and board gender diversity, indicating that CSR performance and board gender diversity function more as substitutes than complements. Despite the unexpected consequences of interacting with female directors and their foreign experience with CSR, the study affirms the significance of CSR practices and board gender diversity in shaping borrowers’ financial decisions.

This study, grounded in the principles of the upper echelons theory, aims to assess how the socio-demographic attributes of chief executive officers (CEOs) and the legal systems of their operating countries impact corporate social responsibility (CSR) and corporate performance. In addition, this study seeks to establish a profile of CEO attributes associated with high CSR performance among the world’s best-performing corporations. The empirical analysis is based on a 5-year dataset sample of the top 100 CEOs globally, provided by Harvard Business Review for the years 2015 to 2019. The examined attributes include age, gender, tenure, engineering degree, MBA study, employment type and the legal system of the country where the CEO is operating, all in relation to CSR and corporate performance. Our empirical analysis indicates that CEOs’ age, gender and tenure positively influence CSR and corporate performance. The average CEO age is 60 years, with the majority being male and having a significant tenure ranging from 12 to 15 years. Furthermore, the analysis suggests that engineering and MBA studies do not substantially influence CSR and corporate performance. Insider CEOs also show a positive impact on CSR and corporate performance. The prevalent legal system, according to our analysis, is the common law, with the United States having the highest representation. Moreover, based on our further analysis, a suggested profile of CEOs’ attributes includes internally appointed male CEOs in their early sixties who do not necessarily hold an engineering or MBA degree. The distinctive aspect of this study lies in its multi-attribute approach and the offering of a CEO profile associated with high CSR and corporate performance. This approach opens avenues for future CSR research and exploration.

PurposeTaking hints from the lacunas in the field of ownership structure and corporate social responsibility (CSR) performance of the firms in India, especially when the moderating effect of certain corporate governance mechanism comes into play, this study aims to attempt to fulfill the gap by exploring the ownership structure of the firm (i.e. foreign ownership, institutional ownership and government ownership) and the CSR performance of the firm, when moderated by board independence of the firm. In an additional analysis, the study explores the non-linear effect of foreign ownership structure on the CSR performance in the Indian context.Design/methodology/approachThe study incorporates a strongly balanced panel data set of 280 non-financial National Stock Exchange 500 listed firms for the study period of 2013–2019. The study uses both static and Arellano–Bond dynamic panel model under generalized method of moments (GMMs) framework to establish the relationship between the studied variables.FindingsThe study acknowledges a positive impact of the foreign investors in the CSR performance of Indian firms with a higher proportion of independent directors on the board. The study further finds a contrarian role of government ownership in Indian context among the sampled firms. The study also in its extended analysis finds a non-linear inverted U-shaped relationship between foreign ownership (FO) and the CSR performance, which shows that FO positively impacts the CSR performance until a threshold level of 34% after which the curve starts declining.Practical implicationsOne of the major implications this study provides for the corporate policymakers is that the firms with a string penchant for philanthropic activities such as CSR should be concerned with attracting more foreign investors in their shareholding. Also, a higher proportion of independent directors on the board boost the engagement of the firm in CSR works.Originality/valueThe moderating effect of board independence in the ownership structure–CSR relationship attempted by this study is a rare attempt in a developing economy, such as India, and offers a fresh dimension to the study. Also, the non-linearity relationship between FO and the CSR performance and the threshold level providing the twofold effect of the variables is an innovative research attempt, especially in regard to a developing country like India.

The Impact of Corporate Social Responsibility on Employee Layoffs, Severance Payments, and Layoff Disclosure

PurposeThe purpose of this paper is to investigate whether and how corporate social responsibility (CSR) performance contributes to shape firms’ payout policy. In particular, it examines the influence of CSR performance on payout level and payout channel choice (dividend payment or share repurchases). Additionally, it examines the moderating role of CSR performance in the relationship between dividends and share repurchases.Design/methodology/approachUsing 397 European companies listed in the STOXX Europe 600 over the period from 2009 to 2014, the authors employ regression analysis to explore the link between CSR performance and payout policy.FindingsThe first result shows that firms with high CSR performance engage more in payout policy. Second, when choosing between paying dividends and repurchasing stocks, firms with high CSR performance tend to prefer share repurchases. Finally, CSR performance plays an important role in determining the relationship between dividends and repurchases. Specifically, dividends and share repurchases seem to be more substitutable among socially responsible firms.Practical implicationsFirms that are able to develop successful CSR strategies can generate tangible benefits for their shareholders in the form of high payout levels. An increase in CSR expenditure does not lead to cut or minimize the cash flow paid out to shareholders. In addition, government and regulators have to oblige or at least encourage socially responsible firms to use executive stock option that are dividend protected, in order to reduce distortions in dividend policy.Originality/valueThis is the first attempt to investigate the association between CSR performance and share repurchase activities.

This study investigates the performance of corporate social responsibility (CSR) portfolios based on ESG scores of stocks traded in Borsa Istanbul (BIST). It also evaluates the performance of a trading strategy that represents buying portfolios that include companies with high CSR performance and selling portfolios comprising companies with low CSR performance. Therefore, two portfolios with high and low CSR performance were formed from stocks traded in Borsa Istanbul. These portfolios’ performances were compared from July 2010 to June 2020. The findings show that the alpha coefficient of the portfolio containing stocks of companies with high CSR performance is generally positive and significant. Thus, companies’ past CSR performances provide valuable information for investors. Additionally, based on this, investors can achieve a superior performance against the market. However, the alpha of the difference portfolio, which shows the difference between the two portfolios’ performance, is, in most cases, insignificant. This suggests that there is no proof that the portfolio comprising companies with high CSR performance is superior to the portfolio including companies with low CSR performance. These findings are supported by additional testing. Consequently, our result provides supporting evidence for the “no effect” hypothesis.

This study examines the relationship between corporate social responsibility (CSR) performance and the ability to obtain bank loans in China. Using Rankins’ (RKS) ratings over the period 2010–2015, we find that companies with higher CSR performance can obtain more bank loans with longer maturity. As regional favoritism is a particular kind of behavior in China’s relational society, we examine whether firms that are favored by senior officials are helped with their debt financing from banks. The results indicate that CSR performance has a more positive effect on firms’ ability to obtain bank loans when the firms benefit from favoritism by senior officials. Further research finds that the effect of CSR performance on bank loans is stronger since the passage of a new environmental protection law and stronger at firms with higher degree of favoritism by senior officials.

PurposeThis study aims to examine the impact of independent directors' ownership on corporate social responsibility (CSR) performance. In line with the stakeholder-agency paradigm's prediction, the authors propose that higher independent directors' ownership is associated with higher CSR performance. By drawing on the attention-based view, the authors further examine firm-level conditions that impact the situated attention of independent directors holding high equity ownership as they are active agents.Design/methodology/approachThe authors collected data covering the years 2009–2013 for firms listed in the S&P 500 index. The authors tested the hypotheses using firm fixed-effects models.FindingsThe results show that higher independent directors' ownership is associated with higher CSR performance. Prior firm performance and available slack resources are found to have diverse impacts on the association between independent directors holding high equity ownership and CSR performance.Originality/valueThis study highlights the importance of examining the performance-based incentives of independent directors on firms' CSR performance. This study also provides a better understanding of factors impacting independent directors' situated attention as boundary conditions.

Purpose The growing significance of corporate social responsibility (CSR) disclosures can be evident from the emphasis of recent regulatory changes regarding clarity and completeness of disclosure. This study aims to analyze the relationship between CSR performance and the readability of CSR disclosures among the NIFTY 50 companies through the lens of institutional theory. Furthermore, it aims to examine whether regulatory frameworks, such as business responsibility and sustainability report (BRSR), strengthen or weaken the relationship between CSR performance and the readability of CSR disclosures. Design/methodology/approach Using a manually extracted sample of 341 annual reports of NIFTY 50 companies listed on the National Stock Exchange of India, this study adopts an aggregated and disaggregated dimension of the environmental, social and governance (ESG) databases from the Bloomberg terminal as a proxy of CSR performance and the Bog index as a measure of readability. This study draws on institutional theory to demonstrate a shift from mimetic to coercive isomorphism in CSR disclosure practices under evolving regulatory regimes in India. Findings The findings show that firms with higher CSR performance are likely to have greater readability in CSR disclosure. The social dimension has a significant positive effect on readability. However, the moderating effect of the BRSR framework on the relationship between CSR performance and readability of CSR disclosure is negative. The result obtained is robust to endogeneity, as confirmed with the 2SRI. Practical implications The findings of this study highlight the need for regulators to promote the use of plain language in public disclosure reports. Greater readability associated with plain language increases transparency, builds trust and ensures greater comprehension of CSR communication among stakeholders. Social implications The social implications of this study call for improving the readability of CSR reports and reducing information asymmetry, thus strengthening legitimacy among shareholders. Moreover, the findings signal to regulators the need to oversee narrative disclosure practices, especially for the social dimension, to ensure a clearer and more objective understanding of reports among many stakeholders. Originality/value This study explores the relationship between CSR performance and readability of CSR disclosure in India, where CSR has evolved from philanthropy to a strategic business imperative. This study answers the question of whether the relationship between CSR performance and readability of CSR disclosure changes after the implementation of mandatory reporting frameworks.

Purpose – This paper aims to investigate how corporate social responsibility (CSR) performance (i.e. to the environment, society and stakeholders) and perceived brand quality influence brand preference. The mediating effect of perceived brand quality on the relationship between CSR performance and brand preference is also studied. Design/methodology/approach – In 2011, 243 valid responses to questionnaire surveys were collected from a convenience sample in China. Regression analyses were used to test the hypotheses. Findings – Customers’ brand preference can be enhanced by CSR performance. Performance in each of the three CSR domains (i.e. environment, society and stakeholders) positively impacts brand preference, although to different degrees. The impact of CSR on stakeholders has the strongest influence on Chinese customers’ brand preference among the three CSR domains. Perceived brand quality was found to be a mediator of the relationship between CSR performance and brand preference. Research limitations/implications – This research studies the relationship between CSR performance and brand preference. Results show CSR performance is not the strongest predictor of branding outcomes, its explanatory power is comparatively weaker than that of perceived brand quality. Additionally, we found a mediating effect of perceived brand quality on the relationship between CSR performance and brand preference. Practical implications – Brands can be more attractive to Chinese consumers when brands take appropriate investments in CSR activities. A socially responsible brand is not guaranteed to yield a competitive advantage. Instead a competitive advantage will more likely result through the employment of the appropriate CSR strategies, with a focus on stakeholders’ interests. Originality/value – The current research contributes to the literature by finding that not all CSR activities are equally effective. Customers in emerging markets still appear to be focused more on the quality of brands and, to some extent, stakeholder CSR practice, as these provide direct benefits to customers. Findings of this study also support the notion that Chinese consumers are beginning to use CSR information to evaluate brands.

CSR performance and firm performance in the tourism, healthcare, and financial sectors: Do metrics and CSR committees matter?

This study investigates how managers in firms that have committed fraud strategically use socially responsible activities in coordination with their fraudulent financial reporting practices. Using propensity score matching to select control firms that have a similar probability of fraud in the pre-fraud benchmark period, we find that the corporate social responsibility (CSR) performance of fraudulent firms in the fraud-committing period is significantly higher compared with the CSR performance of non-fraudulent control firms during this period, and compared with that during their own pre-fraud benchmark periods. This higher CSR performance by fraudulent firms is achieved by means of investing in both stakeholder and third-party CSR categories and by improving in CSR strengths. Furthermore, the increase in CSR performance is more pronounced for fraudulent firms with a weak governance environment, and for firms located in high-religiosity states. Overall, our findings suggest that fraudulent firms strategically adjust their CSR performance to coordinate with their fraudulent financial activities.