Imitation through Board Interlocks: CSR Reporting in China

Abstract

Institutional pressures affect firms’ decisions on corporate social responsibility (CSR), including CSR reporting. Studies generally suggest that regulatory pressures, such as regulations and guidelines determine the variations in CSR activities, sharing the key assumption that firms under the legitimacy pressure seek institutional signals to guide their CSR behaviors. Building on the organizational legitimacy literature that both regulatory and social dimensions of institutional demands are important in determining firms’ overall standing, this paper focuses on board interlocks, a valuable social reference and argues that firms imitate their interlocking firms to adopt CSR reporting. A study based on a sample of Chinese public firms from 2009 to 2015 confirms the argument and shows that three types of imitations through board interlocks (frequency-based, trait-based and outcome- based) positively affect the firm’s CSR reporting. Furthermore, firm uncertainty positively moderates the relationships between interlock imitations and CSR reporting. Our study contributes to the literature on CSR reporting by uncovering the effect of social aspect of institutional pressures, and advances research on imitation mechanisms of board interlocks by showing firms imitate through board interlocks when they decide on CSR reporting.