Corporate governance and performance in socially responsible corporations in South Africa: new empirical insights from a multi-theoretical perspective

Ntim, Collins G. and Soobaroyen, Teerooven (2012) Corporate governance and performance in socially responsible corporations in South Africa: new empirical insights from a multi-theoretical perspective Southampton, GB. University of Southampton (Submitted)

Abstract

Manuscript Type: Empirical

Research Question/Issue: This paper investigates the link between corporate governance (CG) and corporate social responsibility (CSR), and consequently, examines whether CG can moderate the association between corporate financial performance (CFP) and CSR.

Research Findings/Insights: Using a sample of large South African listed corporations from 2002 to 2009, we find that, on average, better-governed corporations tend to pursue a more socially responsible agenda through increased CSR practices. We also find that a combination of CSR and CG practices has a stronger positive effect on CFP than CSR alone, implying that CG positively moderates the CFP-CSR relationship. Our results are robust to controlling for different types of endogeneities, as well as alternative CFP, CG and CSR proxies.

Theoretical/Academic Implications: The paper generally contributes to the literature on CG, CSR and CFP. Specifically, we make two main new contributions to the extant literature by drawing on new insights from a modified Chen and Roberts’ (2010) multi-theoretical framework within a unique institutional, CG and CSR context. First, we show why and how better-governed corporations are more likely to pursue a more socially responsible agenda. Second, we provide evidence on why and how CG might moderate the connection between CFP and CSR.

Practical/Policy Implications: Our findings have important implications for corporate regulators and policy-makers, particularly for those in other emerging countries facing socio-economic challenges that are currently planning to pursue CG and CSR policy reforms. Since our evidence suggests that better-governed corporations are more likely to be more socially responsible with positive effect on CFP, it provides corporate regulators and policy-makers in other developing countries currently contemplating to pursue CG reforms with a strong motivation to do so formally and jointly with CSR reforms.

Keywords: Corporate Governance, Corporate Social Responsibility, Corporate Financial Performance, Multiple Theoretical Perspective, South Africa

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Contributors

Author: Collins G. Ntim

Author: Teerooven Soobaroyen

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