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Political corruption and Corporate Social Responsibility (CSR)

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  • Hossain, Ashrafee Tanvir
  • Kryzanowski, Lawrence

Abstract

In this study we investigate the relationship between political corruption and corporate social responsibility (CSR) strengths. We provide evidence that firms situated in U.S. states with higher levels of corruption exhibit poorer CSR strengths. Our results survive an array of robustness and endogeneity tests. We identify a positive (negative) effect on a firm’s CSR reporting or disclosure practices (the rater’s assessment of the firm’s CSR activities and policies) after state-level exogenous shocks from political scandal revelations for firms headquartered in the scandal states. We show that firms with higher political connections obtained through campaign contributions rely less on CSR strengths for a given level of corruption. Additionally, we find that the influence of corruption on CSR is larger than that of other traditional external societal norms, namely, social capital and religiosity.

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  • Hossain, Ashrafee Tanvir & Kryzanowski, Lawrence, 2021. "Political corruption and Corporate Social Responsibility (CSR)," Journal of Behavioral and Experimental Finance, Elsevier, vol. 31(C).
    • Handle: RePEc:eee:beexfi:v:31:y:2021:i:c:s2214635021000824
    DOI: 10.1016/j.jbef.2021.100538
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    More about this item

    Keywords

    Corporate Social Responsibility (CSR); Political corruption; Political connections; Campaign contributions; Social capital and religiosity;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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