The Foundations of Corporate Social Responsibility
CentER Discussion Paper Series No. 2013-071
51 Pages Posted: 4 Dec 2013 Last revised: 8 Apr 2014
There are 3 versions of this paper
On the Foundations of Corporate Social Responsibility
The Foundations of Corporate Social Responsibility
The Foundations of Corporate Social Responsibility
Date Written: December 2, 2013
Abstract
We investigate the roles of legal origins and political institutions – believed to be the fundamental determinants of economic outcomes – in corporate social responsibility (CSR). We argue that CSR is an essential path to economic sustainability, and document strong correlations between country-level sustainability ratings and various extensive firm-level CSR ratings with global coverage. We contrast the different views on how legal origins and political institutions affect corporations’ tradeoff between shareholder and stakeholder rights. Our empirical evidence suggest that: (a) Legal origins are more fundamental sources of CSR adoption and performance than firms’ financial and operational performance; (b) Among different legal origins, the English common law – widely believed to be mostly shareholder-oriented – fosters CSR the least, (c) Within the civil law countries, firms of countries with German legal origin outperform their French counterparts in terms of ecological and environmental policy, but the French legal origin firms outperform German legal origin companies in social issues and labor relations. Companies under the Scandinavian legal origin score highest on CSR (and all its subfields); (d) Political institutions – democratic rules and constraints to political executives – are not preconditions for CSR and sustainability, and sometimes even hinder CSR implementation. Our results are robust after controlling for corporate governance, culture, firm-level financial performance and constraints, and different indices of political institutions.
Keywords: corporate social responsibility, sustainability, legal origins, political institutions, shareholder orientation, stakeholder orientation
JEL Classification: G30, K22 , M14, O10, O57
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Individual and Corporate Social Responsibility
By Roland Bénabou and Jean Tirole
-
Individual and Corporate Social Responsibility
By Jean Tirole and Roland Bénabou
-
Financial Constraints on Corporate Goodness
By Harrison G. Hong, Jeffrey D. Kubik, ...
-
Financial Constraints on Corporate Goodness
By Jeffrey D. Kubik, José A. Scheinkman, ...
-
Financial Constraints on Corporate Goodness
By Harrison G. Hong, Jeffrey D. Kubik, ...
-
Do Managers Do Good with Other Peoples' Money?
By Ing-haw Cheng, Harrison G. Hong, ...
-
Do Managers Do Good with Other People's Money?
By Ing-haw Cheng, Harrison G. Hong, ...
-
Stock Market Aversion? Political Preferences and Stock Market Participation
By Markku Kaustia and Sami Torstila