The causal Effect of corporate governance on corporate social responsibility

Souhaila Kammoun (IHEC, CODECI, University of Sfax, Tunisia), Sahar Loukil (University of Sfax, Tunisia) and Youssra Ben Romdhane Loukil (University of Sfax, Tunisia)

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What are the factors affecting corporate social responsibility?
What is the relationship between CG and CSR?
What are the 4 main theories of corporate social responsibility?
What are the 4 categories to make global impact in corporate social responsibility?

DOI: 10.4018/978-1-6684-5590-6.ch054

Motivated by the stakeholder theory and legitimacy theory, this study looks at the causal effect of Corporate Governance (CG) on Corporate Social Responsibility (CSR). The study utilized a sample of 100 companies listed at the Colombo Stock Exchange during 2017 and 2018. The sample excluded banking, finance and insurance and investment trusts sectors due to its’ inherent nature of being highly regulated. This research was conducted in two parts. First the empirical association between CG and CSR was studied based on secondary data gathered from annual reports. CG and CSR was measured based on disclosure indexes. Further, firm size, profitability, and firm age were used as control variables. Secondly, five in depth interviews were carried out to uncover the nature of the relationship between CG and CSR. The interviewees included senior managers attached to the accounting function or CSR program of five companies of the selected sample. The results from the regression analysis shows a significant positive relationship between CG and CSR. This implies CSR increases as governance quality improves. The in-depth interviews with top managers complemented this result. Accordingly, all the managers conceive CG as an essential component for a successful CSR drive. The findings from the study implies that Sri Lanka is moving towards counterbalancing the dominance given to CG by giving some attention to CSR. This study makes two important theoretical contributions. First, it adds to the limited number of studies that has been done in the Sri Lankan context to determine the relationship between CG and CSR. Secondly, it gives a basis to the future researchers to explore the nature and the extent of the relationship between CG and CSR in a deeper level. Finally, the researcher expects the findings will have a practical implication for future policies in CSR and CG.

Proceedings of the 3rd International Conference of Business, Accounting, and Economics, ICBAE 2022, 10-11 August 2022, Purwokerto, Central Java, Indonesia

. This empirical study examines the relationship between CSR, corporate governance, and organizational performance or firm value in an emerging country. For this study, the five-year panel data from… Expand

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In this article, we examine the empirical association between corporate governance (CG) and corporate social responsibility (CSR) engagement by investigating their causal effects. Employing a large and extensive US sample, we first find that while the lag of CSR does not affect CG variables, the lag of CG variables positively affects firms’ CSR engagement, after controlling for various firm characteristics. In addition, to examine the relative importance of stakeholder theory and agency theory regarding the associations among CSR, CG, and corporate financial performance (CFP), we also examine the relation between CSR and CFP. After correcting for endogeneity bias, our results show that CSR engagement positively influences CFP, supporting the conflict-resolution hypothesis based on stakeholder theory, but not the CSR overinvestment argument based on agency theory. Furthermore, firms’ CSR engagement with the community, environment, diversity, and employees plays a significantly positive role in enhancing CFP.

Today, the three biggest factors of corporate social responsibility that are impacting social impact programs are: consumer and workforce demand, industry regulations and guidelines, and technology and reporting.

What is the relationship between CG and CSR?

The relationship between good corporate governance and social responsibility helps corporations keep things in good balance. It also supports the company's efforts to develop control mechanisms, increasing shareholder value and improving satisfaction among shareholders and stakeholders.

Corporate social responsibility is traditionally broken into four categories: environmental, philanthropic, ethical, and economic responsibility.

The four main types of CSR are environmental responsibility, ethical responsibility, philanthropic responsibility and economic responsibility. However, companies can also consider different forms of CSR, such as diversity and inclusion, governance, well-being and employee engagement.