Board Capital CSR Engagement and Firm Financial Performance Empirical Evidence From India

Abstract

Extant literature acknowledges the role of corporate social responsibility engagement and sustainability practices on the financial success of business enterprises. Consequently many studies also examine the various drivers of CSR engagement- the process through which firms identify activities to fulfill their social and environmental commitments, allocate resources and execute them. One of the major drivers of firm level CSR engagement as identified by current literature is the board of directors. Studies that explore the relationship between corporate boards and CSR engagement of firms have been mainly conducted in developed markets using the perspective of Agency theory. However, in recent years, corporate social responsibility has emerged as a significant differentiator of firms even in emerging markets. Yet, studies that investigate Board- CSR engagement dynamics in emerging markets are limited. Moreover, this relationship is not explored comprehensively from a resource dependence perspective which some scholars consider as a better theory to explain the workings of corporate boards and their impact on firm outcomes in emerging markets. This thesis attempts to address the research gap by studying corporate boards - corporate social responsibility engagement relationship from a resource dependence perspective in emerging markets. We argue that the relationship between corporate boards and CSR engagement that are established in developed markets on the basis of agency logic inspired corporate governance mechanisms may not hold true in emerging markets. First, unlike the developed market firms that have dispersed ownership, emerging v market firms usually have concentrated ownerships with owners often handling key managerial positions. Therefore, typical agency problems that exist between management and owners in developed market firms are not found in emerging markets. Hence, the monitoring role of the board, and mechanisms created to support this role are less relevant in emerging markets.