Social Networks and Corporate Social Responsibility

Abstract

I show that corporate social responsibility (CSR) spreads through the social networks of firms' directors. This result is obtained using a novel identification strategy exploiting the imperfect overlap between industry, geographic and social peers, a diff-in-diff relying on directors' deaths, and a regression discontinuity design based on CSR proposals. Social network effects are concentrated in firms pursuing product differentiation strategies for which CSR is more likely to add value, firms strategically positioned in the social network to acquire valuable information, and firms in which the incentives of managers and shareholders are aligned. This suggests that some firms aim to create value by using social networks as a market for information exchange on CSR. I find little evidence for alternative explanations such as social norms and agency problems.

Keywords: Corporate Social Responsibility, Social Networks, Information Diffusion, Boards, Corporate Governance

JEL Classification: D85, G30, G34, M14