Finance and Society: On the Foundations of Corporate Social Responsibility (Revised version of CentER DP 2013-071)

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Abstract

We investigate the fundamental determinants and value implications of corporate social responsibility (CSR) around the world. We contrast three broad views on CSR: (1) it is a response to government failure; (2) it reflects individual and societal preferences; (3) it is an equilibrium result of a country's legal origin that shapes the corporations' tradeoff between shareholder and stakeholder values. Using public and proprietary country-level sustainability and firm-level CSR data, we find that: (a) Legal origins are more fundamental sources of CSR than political, social, and firm-level financial forces; (b) The English common low, widely-recognized as being most shareholder-oriented and economically efficient, fosters CSR and sustainability the least, while companies under the civil law origin assume most social responsibilities; (c) Globally, CSR contributes to shareholder value maximization.
Original languageEnglish
Place of PublicationTilburg
PublisherCentER, Center for Economic Research
Number of pages55
Volume2014-069
Publication statusPublished - 1 Dec 2014

Publication series

NameCentER Discussion Paper
Volume2014-069

Keywords

  • Corporate social responsibility
  • sustainability
  • legal origins
  • stakeholder orientation

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