Impact of Director’s Network on Corporate Social Responsibility

Abstract

Prior studies have focused on director’s political ideology, their external pressure, financial incentives and corporate reputation in relation to corporate social responsibility (CSR). However, a little attention has been given whether directors’ personal and professional networks can influence the CSR performance of firms. In this study, we investigate the effects of director’s network on their CSR performance. Using an unbalanced panel data of 785 publicly listed firms from 28 countries during 2003 – 2016, we find that while director’s professional network positively affects their CSR activities, their personal network, in fact, does the opposite. In addition, director’s network centrality advances the CSR performance of their firms. These results are confirmed by addressing endogeneity issue arising out of simultaneously determined director’s network and CSR score of firms and unobserved firm characteristics that are correlated with CSR score and directors network. Our findings contribute to the academic literature related to director's network by providing new empirical evidence and a better understanding of the decisions and activities that directors undertake, when deciding their CSR and also help policymakers to understand the importance of director's networks as a determining factor of CSR policies.