TITLE:
The Impact of External Business Environment on Corporate Social Responsibility: Theoretical Implications and Empirical Evidence
AUTHORS:
Yankuo Qiao
KEYWORDS:
External Business Environment, Corporate Social Responsibility, Analytical Modeling, CEO Centric Effect, Agency Theory
JOURNAL NAME:
Theoretical Economics Letters,
Vol.10 No.3,
May
27,
2020
ABSTRACT: The literature evidently demonstrates the
CEO-centric effect upon firms’ Corporate Social Responsibility (CSR)
engagements. Given the CEO’s strong discretionary power over CSR decisions and
self-serving motive divergent from shareholder value maximization, it would be
interesting to investigate the strategic decisions made by the CEO on CSR
policy facing varied dimensions of market conditions. From an agency theory
perspective, the paper develops a theoretical framework to model and clarify the relationships between
firm’s CSR provisions and the three dimensions of external market conditions:
market complexity, munificence, and dynamism. Furthermore, I empirically
measure the market dimensions and test the propositions implied by the
theoretical work. Consistent with the model implications, I found CEOs tend to
invest more in CSR in a competitive market, less in CSR when the market is
munificent and more in CSR when the market is dynamic and unpredictable. The results
are consistent with the extant literature and shed light on the value relevancy
of CSR activities.