Finance and Society: On the Foundations of Corporate Social Responsibility

CentER Discussion Paper No. 2014-069

TILEC Discussion Paper No. 2014-052

55 Pages Posted: 19 Dec 2014

See all articles by Hao Liang

Hao Liang

Singapore Management University - Lee Kong Chian School of Business; European Corporate Governance Institute (ECGI)

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Date Written: December 2014

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 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

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

Hao Liang (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

HOME PAGE: http://business.smu.edu.sg/faculty/profile/130396/LIANG-Hao

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Luc Renneboog

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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