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Abstract
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.
- Content Type Journal Article
- Pages 1-20
- DOI 10.1007/s10551-011-1052-1
- Authors
- Hoje Jo, Department of Finance, Leavey School of Business, Santa Clara University, 500 El Camino Real, Santa Clara, CA 95053-0388, USA
- Maretno A. Harjoto, Graziadio School of Business and Management, Pepperdine University, 24255 Pacific Coast Highway, Malibu, CA 90263, USA
- Journal Journal of Business Ethics
- Online ISSN 1573-0697
- Print ISSN 0167-4544