Finance and Society: On the Foundations of Corporate Social Responsibility

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 failures; (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 law, 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.

Keywords: Corporate social responsibility, sustainability, legal origins, stakeholder orientation, shareholder value.

JEL Classification: G30, K22 , M14, O10, O57

Suggested Citation: Suggested Citation

Liang, Hao and Renneboog, Luc, Finance and Society: On the Foundations of Corporate Social Responsibility (December 2014). CentER Discussion Paper No. 2014-069, TILEC Discussion Paper No. 2014-052, Available at SSRN: https://ssrn.com/abstract=2540024 or http://dx.doi.org/10.2139/ssrn.2540024