Board Network Centrality and Corporate Social Responsibility

Abstract

The previous business literature mainly investigates the effects of board network on the financial performance of firms. In this paper, we contribute to the literature by examining its impact on firm non-financial performance. We find that firms with central or well-connected boards of directors invest more in corporate social responsibility (CSR). We show that this impact is stronger for firms with strong corporate governance, high institutional ownership, or high public awareness. Moreover, this positive effect is also more pronounced for firms that need high commitment of stakeholders to success, such as firms with larger investments in research and development (R&D) or those in more competitive industries. These findings are consistent with the view that well-connected boards are positively associated with better monitoring and advising.

Keywords: board interlock, board network centrality, corporate social responsibility

JEL Classification: G30, G14, L14, Z13