Chen, Szu-Yu
(2023)
Ownership and control, corporate social responsibility, and the institutional context in East Asia.
PhD thesis, University of Nottingham.
Abstract
This thesis aims to explore the inter-relationships between corporate ownership and control, corporate social responsibility (CSR) and the national institutional environment in East Asia. It examines whether a firm being controlled by family, institutional investors or government affect a firm’s CSR performance and CSR decoupling behaviour. This is essential given that distinctive types of firm controllers and ownership structures influence the shift from shareholder primacy to stakeholders. Moreover, CSR may vary under country-specific institutional frameworks. Differences in the degree of institutional embeddedness of firms in different economies may shape stakeholders’ interests and replace the firm’s incentive to invest in CSR. Based mainly on the stakeholder and institutional theories and integration with other theories, this research scrutinises whether families, institutional investors and governments and institutional-level factors such as capitalism and legal origins interrelate with CSR.
Using a sample of public companies from nine countries in East Asia and quantitative methods for empirical analysis, several significant findings support the existing theory and contribute to CSR and corporate governance literature. First, regarding relationship between controlling ownership type and CSR, findings suggest that family firms may be more interested in their own family benefits since they believe the cost of CSR exceeds the returns. If institutional investors or the government have the control power in a firm, they will act in the interests of stakeholders and thus have positive impacts on CSR.
Second, the discussion about the role of ownership and control in CSR decoupling suggests the gap between CSR disclosure and performance is influenced by corporate ultimate controller. Family-controlled firms report better CSR disclosures to maintain corporate legitimacy and increase CSR decoupling. Namely, they prioritise shareholder value, and their CSR performance is exaggerated in their reportage. Institutional ownership and government-controlled firms show the converse result of family firms.
Third, there are moderators inside the relationship between national institutions and CSR, indicating the existence of indirect effects on CSR. It is found that in coordinated market economies, family firms’ influence on CSR is weaker, with family control negatively impacting CSR and coordinated market framework positively affecting it. Coordinated market framework moderates the negative family control-CRS link. Furthermore, civil law origin negatively affects CSR and it will worsen the negative influence of family control on CSR performance. Interestingly, in civil law regions, government control’s positive effect on CSR is more pronounced.
This thesis contributes to the broad literature on CSR and corporate governance, and especially CSR in the East Asian context by providing empirical evidence. Overall, it contributes to the stakeholder theory by using corporate controller concept to identify CSR preferences of firms, and adds to the institutional theorising of CSR by demonstrating to what extent capitalism and legal origins, directly and indirectly, influence CSR. In addition, the thesis contributes to agency theory by suggesting that the agency problem of family control would decrease a firm’s CSR in East Asia. Including CSR disclosure and performance, this thesis’s discussions on CSR decoupling enrich legitimacy theory by highlighting the importance of perceived legitimacy and the conflict between stakeholders and shareholders.
It also provides critical insights to policy makers for regulating corporate governance and CSR. For instance, the strict regulatory framework may pressure firms to invest in CSR and share welfare responsibilities, but different corporate ultimate controllers are also dominant in CSR. Whether a firm is controlled by family, institutional investors or government could influence CSR performance and decoupling behaviour. The thesis also suggests practical implications to corporate internal and external participants. Both managers and investors should be aware of a firm being controlled by family, while it may deliver CSR with fewer positive signs.
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