IDEAS home Printed from https://ideas.repec.org/a/eee/jbrese/v125y2021icp143-154.html
   My bibliography  Save this article

Corporate social irresponsibility and boards: The implications of legal expertise

Author

Listed:
  • Dharwadkar, Ravi
  • Guo, Jun
  • Shi, Linna
  • Yang, Rong

Abstract

In this study, we examine whether Corporate Social Irresponsibility (CSIR) affects the appointment of directors with legal expertise on the board and whether the presence of legal directors has implications for the CSIR-stock return relationship. Using a large sample of publicly traded U.S. firms, we find that firms involved more in CSIR have more directors with legal expertise on the board in subsequent years. Our additional tests suggest that this relationship is not driven by omitted variables or reverse causality. We further find that board legal expertise helps to mitigate the negative stock performance arising from CSIR. Overall, our findings suggest that boards with legal expertise are better able to respond to CSIR and mitigate its damage.

Suggested Citation

  • Dharwadkar, Ravi & Guo, Jun & Shi, Linna & Yang, Rong, 2021. "Corporate social irresponsibility and boards: The implications of legal expertise," Journal of Business Research, Elsevier, vol. 125(C), pages 143-154.
  • Handle: RePEc:eee:jbrese:v:125:y:2021:i:c:p:143-154
    DOI: 10.1016/j.jbusres.2020.12.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S014829632030833X
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jbusres.2020.12.003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jason Zhang & Hong Zhu & Hung-bin Ding, 2013. "Board Composition and Corporate Social Responsibility: An Empirical Investigation in the Post Sarbanes-Oxley Era," Journal of Business Ethics, Springer, vol. 114(3), pages 381-392, May.
    2. White, Joshua T. & Woidtke, Tracie & Black, Harold A. & Schweitzer, Robert L., 2014. "Appointments of academic directors," Journal of Corporate Finance, Elsevier, vol. 28(C), pages 135-151.
    3. Sweetin, Vernon H. & Knowles, Lynette L. & Summey, John H. & McQueen, Kand S., 2013. "Willingness-to-punish the corporate brand for corporate social irresponsibility," Journal of Business Research, Elsevier, vol. 66(10), pages 1822-1830.
    4. Hoje Jo & Maretno Harjoto, 2011. "Corporate Governance and Firm Value: The Impact of Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 103(3), pages 351-383, October.
    5. Clemens, Bruce & Douglas, Thomas J., 2006. "Does coercion drive firms to adopt 'voluntary' green initiatives? Relationships among coercion, superior firm resources, and voluntary green initiatives," Journal of Business Research, Elsevier, vol. 59(4), pages 483-491, April.
    6. Olga Hawn & Ioannis Ioannou, 2016. "Mind the gap: The interplay between external and internal actions in the case of corporate social responsibility," Strategic Management Journal, Wiley Blackwell, vol. 37(13), pages 2569-2588, December.
    7. Mark P. Sharfman & Chitru S. Fernando, 2008. "Environmental risk management and the cost of capital," Strategic Management Journal, Wiley Blackwell, vol. 29(6), pages 569-592, June.
    8. Vanessa M Strike & Jijun Gao & Pratima Bansal, 2006. "Being good while being bad: social responsibility and the international diversification of US firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(6), pages 850-862, November.
    9. Taïeb Hafsi & Gokhan Turgut, 2013. "Boardroom Diversity and its Effect on Social Performance: Conceptualization and Empirical Evidence," Journal of Business Ethics, Springer, vol. 112(3), pages 463-479, February.
    10. Becchetti, Leonardo & Ciciretti, Rocco & Hasan, Iftekhar & Kobeissi, Nada, 2012. "Corporate social responsibility and shareholder's value," Journal of Business Research, Elsevier, vol. 65(11), pages 1628-1635.
    11. Saeidi, Sayedeh Parastoo & Sofian, Saudah & Saeidi, Parvaneh & Saeidi, Sayyedeh Parisa & Saaeidi, Seyyed Alireza, 2015. "How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction," Journal of Business Research, Elsevier, vol. 68(2), pages 341-350.
    12. Price, Joseph M. & Sun, Wenbin, 2017. "Doing good and doing bad: The impact of corporate social responsibility and irresponsibility on firm performance," Journal of Business Research, Elsevier, vol. 80(C), pages 82-97.
    13. Jacob Rose, 2007. "Corporate Directors and Social Responsibility: Ethics versus Shareholder Value," Journal of Business Ethics, Springer, vol. 73(3), pages 319-331, July.
    14. Gerwin Laan & Hans Ees & Arjen Witteloostuijn, 2008. "Corporate Social and Financial Performance: An Extended Stakeholder Theory, and Empirical Test with Accounting Measures," Journal of Business Ethics, Springer, vol. 79(3), pages 299-310, May.
    15. Armstrong, J. Scott & Green, Kesten C., 2013. "Effects of corporate social responsibility and irresponsibility policies," Journal of Business Research, Elsevier, vol. 66(10), pages 1922-1927.
    16. Kotchen Matthew & Moon Jon J., 2012. "Corporate Social Responsibility for Irresponsibility," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-23, November.
    17. Harrison Hong & Inessa Liskovich, 2015. "Crime, Punishment and the Halo Effect of Corporate Social Responsibility," NBER Working Papers 21215, National Bureau of Economic Research, Inc.
    18. Stuart L. Hart & Gautam Ahuja, 1996. "Does It Pay To Be Green? An Empirical Examination Of The Relationship Between Emission Reduction And Firm Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 5(1), pages 30-37, March.
    19. Perks, Keith J. & Farache, Francisca & Shukla, Paurav & Berry, Aidan, 2013. "Communicating responsibility-practicing irresponsibility in CSR advertisements," Journal of Business Research, Elsevier, vol. 66(10), pages 1881-1888.
    20. El Ghoul, Sadok & Guedhami, Omrane & Kwok, Chuck C.Y. & Mishra, Dev R., 2011. "Does corporate social responsibility affect the cost of capital?," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2388-2406, September.
    21. Korschun, Daniel & Du, Shuili, 2013. "How virtual corporate social responsibility dialogs generate value: A framework and propositions," Journal of Business Research, Elsevier, vol. 66(9), pages 1494-1504.
    22. Loughran, Tim & Ritter, Jay R, 1995. "The New Issues Puzzle," Journal of Finance, American Finance Association, vol. 50(1), pages 23-51, March.
    23. Luis Diestre & Juan Santaló, 2020. "Why Do Firms Suffer Differently from Input Stigmatization? The Costs of Removing Stigmatized Inputs," Organization Science, INFORMS, vol. 31(1), pages 47-66, January.
    24. Shahzad, Ali M. & Mousa, Fariss T. & Sharfman, Mark P., 2016. "The implications of slack heterogeneity for the slack-resources and corporate social performance relationship," Journal of Business Research, Elsevier, vol. 69(12), pages 5964-5971.
    25. Gopal V. Krishnan & Gnanakumar Visvanathan, 2008. "Does the SOX Definition of an Accounting Expert Matter? The Association between Audit Committee Directors' Accounting Expertise and Accounting Conservatism," Contemporary Accounting Research, John Wiley & Sons, vol. 25(3), pages 827-858, September.
    26. Humphry Hung, 2011. "Directors’ Roles in Corporate Social Responsibility: A Stakeholder Perspective," Journal of Business Ethics, Springer, vol. 103(3), pages 385-402, October.
    27. Maryjane R. Rabier, 2017. "Acquisition Motives and the Distribution of Acquisition Performance," Strategic Management Journal, Wiley Blackwell, vol. 38(13), pages 2666-2681, December.
    28. Ye Cai & Hoje Jo & Carrie Pan, 2011. "Vice or Virtue? The Impact of Corporate Social Responsibility on Executive Compensation," Journal of Business Ethics, Springer, vol. 104(2), pages 159-173, December.
    29. Maretno Harjoto & Indrarini Laksmana & Robert Lee, 2015. "Board Diversity and Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 132(4), pages 641-660, December.
    30. Elena Beccalli & Barbara Casu & Claudia Girardone, 2006. "Efficiency and Stock Performance in European Banking," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(1‐2), pages 245-262, January.
    31. James S. Linck & Jeffry M. Netter & Tina Yang, 2009. "The Effects and Unintended Consequences of the Sarbanes-Oxley Act on the Supply and Demand for Directors," Review of Financial Studies, Society for Financial Studies, vol. 22(8), pages 3287-3328, August.
    32. Julian F. Kölbel & Timo Busch & Leonhardt M. Jancso, 2017. "How Media Coverage of Corporate Social Irresponsibility Increases Financial Risk," Strategic Management Journal, Wiley Blackwell, vol. 38(11), pages 2266-2284, November.
    33. Lin-Hi, Nick & Müller, Karsten, 2013. "The CSR bottom line: Preventing corporate social irresponsibility," Journal of Business Research, Elsevier, vol. 66(10), pages 1928-1936.
    34. Nishant Dass & Omesh Kini & Vikram Nanda & Bunyamin Onal & Jun Wang, 2014. "Board Expertise: Do Directors from Related Industries Help Bridge the Information Gap?," Review of Financial Studies, Society for Financial Studies, vol. 27(5), pages 1533-1592.
    35. Ruchunyi Fu & Yi Tang & Guoli Chen, 2020. "Chief sustainability officers and corporate social (Ir)responsibility," Strategic Management Journal, Wiley Blackwell, vol. 41(4), pages 656-680, April.
    36. David A. Carter & Betty J. Simkins & W. Gary Simpson, 2003. "Corporate Governance, Board Diversity, and Firm Value," The Financial Review, Eastern Finance Association, vol. 38(1), pages 33-53, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sumaia Ayesh Qaderi & Belal Ali Abdulraheem Ghaleb & Abdulwahid Ahmed Hashed & Turki Raji Alhmoud & Hasnah Kamardin, 2023. "Audit Committee Leadership Attributes and CSR Reporting: Evidence from Jordan," SAGE Open, , vol. 13(3), pages 21582440231, August.
    2. Emmadonata Carbone & Sara Saggese & Fabrizia Sarto, 2023. "La relazione tra l?esperienza degli amministratori e il business plan: un?indagine empirica sulle imprese quotate in Italia," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2023(1), pages 69-94.
    3. Chipangamate, Nelson S. & Nwaila, Glen T. & Bourdeau, Julie E. & Zhang, Steven E., 2023. "Integration of stakeholder engagement practices in pursuit of social licence to operate in a modernising mining industry," Resources Policy, Elsevier, vol. 85(PB).
    4. Zhong, Xi & Ren, Ge, 2023. "Independent and joint effects of CSR and CSI on the effectiveness of digital transformation for transition economy firms," Journal of Business Research, Elsevier, vol. 156(C).
    5. Ji-Hee Kim & Ji-Hwan Lee, 2021. "How CEO Political Connections Induce Corporate Social Irresponsibility: An Empirical Study of Tax Avoidance in South Korea," Sustainability, MDPI, vol. 13(14), pages 1-13, July.
    6. Zhong, Xi & Chen, Weihong & Ren, Ge, 2022. "The impact of corporate social irresponsibility on emerging-economy firms’ long-term performance: An explanation based on signal theory," Journal of Business Research, Elsevier, vol. 144(C), pages 345-357.
    7. Jin‐Ki Hong & Ji‐Hwan Lee & Taewoo Roh, 2022. "The effects of CEO narcissism on corporate social responsibility and irresponsibility," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1926-1940, September.
    8. Anita Mendiratta & Shveta Singh & Surendra Singh Yadav & Arvind Mahajan, 2023. "Bibliometric and Topic Modeling Analysis of Corporate Social Irresponsibility," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 24(3), pages 319-339, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. María Iborra & Marta Riera, 2023. "Corporate social irresponsibility: What we know and what we need to know," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(3), pages 1421-1439, May.
    2. Anita Mendiratta & Shveta Singh & Surendra Singh Yadav & Arvind Mahajan, 2023. "Bibliometric and Topic Modeling Analysis of Corporate Social Irresponsibility," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 24(3), pages 319-339, September.
    3. Price, Joseph M. & Sun, Wenbin, 2017. "Doing good and doing bad: The impact of corporate social responsibility and irresponsibility on firm performance," Journal of Business Research, Elsevier, vol. 80(C), pages 82-97.
    4. Anita, Mendiratta & Shveta, Singh & Yadav Surendra, S. & Arvind, Mahajan, 2023. "When do ESG controversies reduce firm value in India?," Global Finance Journal, Elsevier, vol. 55(C).
    5. Maretno Harjoto & Indrarini Laksmana & Robert Lee, 2015. "Board Diversity and Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 132(4), pages 641-660, December.
    6. Patro, Sukesh & Zhang, Lu Y. & Zhao, Rong, 2018. "Director tenure and corporate social responsibility: The tradeoff between experience and independence," Journal of Business Research, Elsevier, vol. 93(C), pages 51-66.
    7. Lu, Hao & Oh, Won-Yong & Kleffner, Anne & Chang, Young Kyun, 2021. "How do investors value corporate social responsibility? Market valuation and the firm specific contexts," Journal of Business Research, Elsevier, vol. 125(C), pages 14-25.
    8. Eunice S. Khoo & Youngdeok Lim & Louise Y. Lu & Gary S. Monroe, 2022. "Corporate social responsibility performance and the reputational incentives of independent directors," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(5-6), pages 841-881, May.
    9. Claude Francoeur & Réal Labelle & Souha Balti & Saloua EL Bouzaidi, 2019. "To What Extent Do Gender Diverse Boards Enhance Corporate Social Performance?," Journal of Business Ethics, Springer, vol. 155(2), pages 343-357, March.
    10. Paul B. McGuinness & João Paulo Vieito & Mingzhu Wang, 2020. "Proactive government intervention, board gender balance, and stakeholder engagement in China and Europe," Asia Pacific Journal of Management, Springer, vol. 37(3), pages 719-762, September.
    11. Shili Chen & Niels Hermes & Reggy Hooghiemstra, 2022. "Corporate Social Responsibility and NGO Directors on Boards," Journal of Business Ethics, Springer, vol. 175(3), pages 625-649, January.
    12. Muhammad Safdar Sial & Chunmei Zheng & Jacob Cherian & M.A. Gulzar & Phung Anh Thu & Tehmina Khan & Nguyen Vinh Khuong, 2018. "Does Corporate Social Responsibility Mediate the Relation between Boardroom Gender Diversity and Firm Performance of Chinese Listed Companies?," Sustainability, MDPI, vol. 10(10), pages 1-18, October.
    13. Rafael Alcadipani & Cíntia Rodrigues Oliveira Medeiros, 2020. "When Corporations Cause Harm: A Critical View of Corporate Social Irresponsibility and Corporate Crimes," Journal of Business Ethics, Springer, vol. 167(2), pages 285-297, November.
    14. Francesco Gangi & Eugenio D'Angelo & Lucia Michela Daniele & Nicola Varrone, 2021. "Assessing the impact of socially responsible human resources management on company environmental performance and cost of debt," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(5), pages 1511-1527, September.
    15. Bai Xue & Zhuang Zhang & Pingli Li, 2020. "Corporate environmental performance, environmental management and firm risk," Business Strategy and the Environment, Wiley Blackwell, vol. 29(3), pages 1074-1096, March.
    16. Hans B. Christensen & Luzi Hail & Christian Leuz, 2021. "Mandatory CSR and sustainability reporting: economic analysis and literature review," Review of Accounting Studies, Springer, vol. 26(3), pages 1176-1248, September.
    17. Nguyen, Thi Hong Hanh & Ntim, Collins G. & Malagila, John K., 2020. "Women on corporate boards and corporate financial and non-financial performance: A systematic literature review and future research agenda," International Review of Financial Analysis, Elsevier, vol. 71(C).
    18. Łukasz Matuszak & Ewa Różańska, 2019. "A Non-Linear and Disaggregated Approach to Studying the Impact of CSR on Accounting Profitability: Evidence from the Polish Banking Industry," Sustainability, MDPI, vol. 11(1), pages 1-21, January.
    19. Michael Mayberry, 2020. "Good for managers, bad for society? Causal evidence on the association between risk‐taking incentives and corporate social responsibility," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(9-10), pages 1182-1214, October.
    20. Wang, Yujie & Tsang, Albert & Xiang, Yi & Yao, Daifei (Troy), 2023. "Corporate social responsibility misconduct and formation of board interlocks," Journal of Financial Stability, Elsevier, vol. 67(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbrese:v:125:y:2021:i:c:p:143-154. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusres .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.