It's who you know that counts: Board connectedness and CSR performance

Abu Amin, Lamia Chourou, Syed Kamal, Mahfuja Malik, Yang Zhao

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

We examine whether and how board connections affect the firm's corporate social responsibilities (CSR). Grounded in the agency, resource dependence, and social network theory, our research predicts and finds that board connectedness is positively associated with CSR performance. This result is robust to a quasi-natural experiment, alternative measurement specifications, and an instrumental variable approach. Our findings suggest firms that operate in a complex business environment or require more advising (i.e. where demand for information is greater) benefit more from a well-networked board. Also, firms that are poorly governed, have high stock return volatility, low market capitalization, or low institutional ownership tend to benefit more from the well-connected board when the cost of acquiring information is higher. In addition, we show that independent directors’ abilities to gather information and resources from their networks can facilitate the transmission of information. Collectively, our study documents the informational advantage of a network as the predominant channel that allows a well-connected board to improve a firm's CSR performance.

Original languageEnglish
Article number101662
JournalJournal of Corporate Finance
Volume64
DOIs
StatePublished - Oct 2020

Keywords

  • Board connectedness
  • Corporate social responsibility
  • Social network

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