Exploring how independent directors view CSR inequality using a quasi-natural experiment
ISSN: 1472-0701
Article publication date: 16 August 2020
Issue publication date: 21 August 2020
Abstract
Purpose
The purpose of this paper is to explore corporate social responsibility (CSR) inequality, which is the inequality across different CSR categories. Higher inequality suggests a less balanced CSR policy. To determine if CSR inequality is beneficial or harmful, this paper investigates how independent directors view CSR inequality, using an exogenous regulatory shock introduced by the passage of the Sarbanes–Oxley Act.
Design/methodology/approach
To draw causality, this study relies on a quasi-natural experiment based on an exogenous regulatory shock that forced certain firms to raise board independence. This approach is significantly less vulnerable to endogeneity and is much more likely to show a causal effect. The results using propensity score matching, principal component analysis and instrumental-variable analysis are confirmed.
Findings
The difference-in-difference estimates show that independent directors view CSR inequality unfavorably. Specifically, board independence diminishes CSR inequality by approximately 34%-43%. Because the empirical strategy is based on a quasi-natural experiment, the results are more likely to show causality. The results also imply that CSR inequality is a crucially important aspect of CSR.
Originality/value
Although a substantial volume of research has examined CSR, one vital aspect of CSR has been largely unexplored. Filling this void in the literature, the CSR inequality is investigated. The study is the first to explore how independent directors view CSR inequality using a quasi-natural experiment.
Keywords
Acknowledgements
Part of this research was carried out while Pornsit Jiraporn was a visiting scholar at SASIN School of Management, Chulalongkorn University in Bangkok, Thailand. The author would like to thank SASIN School of Management for research support.
Citation
Ongsakul, V., Jiraporn, N. and Jiraporn, P. (2020), "Exploring how independent directors view CSR inequality using a quasi-natural experiment", Corporate Governance, Vol. 20 No. 6, pp. 1159-1172. https://doi.org/10.1108/CG-03-2020-0086
Publisher
:Emerald Publishing Limited
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