Journal of Business Ethics

, Volume 106, Issue 1, pp 53–72 | Cite as

The Causal Effect of Corporate Governance on Corporate Social Responsibility

  • Hoje Jo
  • Maretno A. Harjoto


In this article, we examine the empirical association between corporate governance (CG) and corporate social responsibility (CSR) engagement by investigating their causal effects. Employing a large and extensive US sample, we first find that while the lag of CSR does not affect CG variables, the lag of CG variables positively affects firms’ CSR engagement, after controlling for various firm characteristics. In addition, to examine the relative importance of stakeholder theory and agency theory regarding the associations among CSR, CG, and corporate financial performance (CFP), we also examine the relation between CSR and CFP. After correcting for endogeneity bias, our results show that CSR engagement positively influences CFP, supporting the conflict-resolution hypothesis based on stakeholder theory, but not the CSR overinvestment argument based on agency theory. Furthermore, firms’ CSR engagement with the community, environment, diversity, and employees plays a significantly positive role in enhancing CFP.


Corporate social responsibility Corporate governance Corporate financial performance Conflict resolution 



We appreciate many valuable comments provided by guest editors of the special issue of JBE, Michele Andreaus and Antonino Vaccaro, two anonymous referees, Luc Van Liedekerke, and other 2010 EBEN annual conference participants. Harjoto acknowledges Julian Virtue Professorship endowment for financial support. Donna Maurer provided editorial assistance.


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Copyright information

© Springer Science+Business Media B.V. 2011

Authors and Affiliations

  1. 1.Department of Finance, Leavey School of BusinessSanta Clara UniversitySanta ClaraUSA
  2. 2.Graziadio School of Business and ManagementPepperdine UniversityMalibuUSA

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