Abstract
The legal origin literature documents that civil and common law traditions have different impacts on economic outcomes. We contribute to this literature by formulating and testing hypotheses on the effect of legal origins on corporate social responsibility, overall and in different specific dimensions. We find that, net of industry-specific effects, companies in common law countries score higher in corporate governance and community involvement, while those in countries belonging to the French legal tradition of civil law do better in human resources. We also observe no significant differences in terms of environmental protection among companies in civil and common law countries, which we attribute to a progressive convergence towards common industry sustainability standards.
Highlights
Advertising social and environmentally friendly behavior, issuing sustainability reports, and hiring Corporate Social Responsibility (CSR, hereon) experts has increasingly become corporate practice in the most recent years [1]
The aim of our paper is to give a contribution to this literature by investigating the nexus between legal origins and CSR [13] in order to understand: i) why some companies engage more in CSR and why others do not; ii) whether this is due to cultural factors and, legal origins; iii) what consequences the different emphasis on specific CSR domains have on the corporate strategy and wellbeing of different stakeholders, i.e., workers, local communities, and shareholders
The descriptive statistics and parametric tests presented so far did not take into account the panel structure of our dataset and did not allow us to isolate the impact of legal origin from other time, industry, and country specific characteristics that are expected to influence CSR scores
Summary
Advertising social and environmentally friendly behavior, issuing sustainability reports, and hiring Corporate Social Responsibility (CSR, hereon) experts has increasingly become corporate practice in the most recent years [1]. The growing relevance of CSR is leading academicians to reflect on whether the latter represents a major change in the economic paradigm with respect to the standard approach In this approach, forces of market competition transform individual and corporate self-interested behavior into an efficient and socially optimal outcome, while the state intervenes with taxes and regulation to address the problem of externalities and public goods redistributing income and wealth according to the dominating social standards [2]. Forces of market competition transform individual and corporate self-interested behavior into an efficient and socially optimal outcome, while the state intervenes with taxes and regulation to address the problem of externalities and public goods redistributing income and wealth according to the dominating social standards [2] In this framework, the invisible hand of the market and the “visible” hand of institutions are sufficient to ensure socially optimal outcomes without the need for an explicit voluntary corporate effort toward social responsibility. From a different point of view, based on standard CSR measures (see Appendix B), we may consider CSR as a move from the goal of maximizing shareholders’ wealth to the more complex goal of satisfying the wellbeing of a broader range of stakeholders
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