National Culture and the Value Implications of Corporate Social Responsibility
96 Pages Posted: 8 Oct 2018
Date Written: September 15, 2018
We examine why corporate social responsibility (CSR) practices vary across countries and firms, and the value implications of such variation. Using Thomson Reuters’ ASSET4 database on the CSR practices of 4,279 firms from 49 countries over 2003–2015 and employing a hierarchical linear model, we find that the national cultural dimension of individualism is positively associated with firm-level CSR practices. We further find that income inequality at the country level and board diversity and corporate transparency at the firm level link individualism to CSR practices. Moreover, both between and within countries, we find a positive association between firm-level CSR practices and firm value, with three firm-level channels — cash flow, cash flow variability, and cost of equity — linking CSR practices to firm value. Finally, we find that the positive association between firm-level CSR practices and firm value is stronger in more individualistic countries.
Keywords: Corporate Social Responsibility; Firm Value; Hierarchical Linear Model; Individualism; National Culture; Environmental Commitments; Social Commitments
JEL Classification: G18; G31; G32
Suggested Citation: Suggested Citation