The link between Corporate Governance and Corporate Social Responsibility

What is it about?

This study finds that firms use governance mechanisms, along with CSR engagement, to reduce conflicts of interest between managers and non-investing stakeholders. This study finds that CSR choice is positively associated with governance characteristics, including board independence, institutional ownership, and analyst following. The results show that CSR engagement positively influences operating performance and firm value, supporting the conflict-resolution hypothesis as opposed to the over-investment and strategic-choice arguments. The study finds only a weak support of the product-signaling hypothesis as a major motive of CSR engagement.

Featured Image

Why is it important?

There is a positive association between firms' corporate governance and firms CSR performance. Firms engage in CSR to reduce the conflict between managers and non-investing stakeholders.