ABSTRACT
This study investigates three possible explanations of the link between Corporate Social Responsibility (CSR) expenditures and future financial performance for family firms: (i) CSR is an investment leading to better future financial performance, (ii) it is a form of firms’ charity, or (iii) it is undertaken when anticipating stronger future financial performance. It also examines whether the institutional environments have effects on this association. We show that family firms in coordinated market economies are characterised by stronger stakeholder relationship and CSR expenditures are undertaken in the current period to legitimate the business operations, as CSR will be financially rewarded in the future. However, firms in liberal market economies are motived by shareholder view to protect investors’ interests and avoid uncertainty and risks, and CSR expenditures are undertaken by linking them to anticipated future corporate performance, hereby corporate accountability reporting can assist outsiders to infer insiders’ private information about future financial prospects.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes
1. Following Maury (2006) and Munari et al. (2010), this study assumes that a firm is considered under control if family holding at least 10% of the voting right.
2. The universe of this dataset includes over 7000 public global firms, covering all major indices such as MSCI World, MSCI Emerging Markets, NASDAQ 100, S&P 500, FTSE 250, STOXX 600, DAX, CAC40, ASX 300, SMI and Bovespa.
3. This paper also run the regression model with firm-level clustered errors, and the results are similar to those based on regression model adjusts standard errors by a two-dimensional cluster at the firm and year levels. For brevity, these results are not discussed or tabulated in the paper.