TY - JOUR
T1 - Does the nature of political connection matter for corporate social responsibility engagement? Evidence from China
AU - Dang, Vinh Q. T.
AU - Otchere, Isaac
AU - So, Erin P. K.
N1 - Acknowledgement:
We would like to thank Gady Jacoby, Zhenyu Wu, and other participants at the 2020 “Cross Country Perspective in Finance” Conference for helpful comments. We are grateful to two anonymous referees for their constructive and insightful suggestions that have significantly improved the research. The remaining errors are ours.
Publisher Copyright:
© 2022 Elsevier B.V.
PY - 2022/9
Y1 - 2022/9
N2 - We examine whether firms' political connection affects their corporate social responsibility (CSR) engagements and how the effects vary with different political ties, namely symbolic and material connections. These ties reflect different degrees of political embeddedness, interest alignment, network size, and monitoring with the government, and therefore impart divergent effects on managerial incentives for CSR practices. Our analysis indicates that CSR in firms with symbolic connection is much more associated with agency cost than CSR in firms with material connection. We also find that large firms with symbolic connection exhibit lower CSR performance than those with material connection, probably because the former group tends to substitute the prestige of their political capital for the goodwill associated with CSR engagement. These results show that accounting for the effects of different types of political connection on managerial incentives contributes some clarity to the debate about the compatibility of CSR with primary corporate mandates.
AB - We examine whether firms' political connection affects their corporate social responsibility (CSR) engagements and how the effects vary with different political ties, namely symbolic and material connections. These ties reflect different degrees of political embeddedness, interest alignment, network size, and monitoring with the government, and therefore impart divergent effects on managerial incentives for CSR practices. Our analysis indicates that CSR in firms with symbolic connection is much more associated with agency cost than CSR in firms with material connection. We also find that large firms with symbolic connection exhibit lower CSR performance than those with material connection, probably because the former group tends to substitute the prestige of their political capital for the goodwill associated with CSR engagement. These results show that accounting for the effects of different types of political connection on managerial incentives contributes some clarity to the debate about the compatibility of CSR with primary corporate mandates.
KW - Corporate social responsibility
KW - Agency cost
KW - Governance
KW - Firm reputation
KW - Political connection
UR - http://www.scopus.com/inward/record.url?scp=85129731407&partnerID=8YFLogxK
U2 - 10.1016/j.ememar.2022.100907
DO - 10.1016/j.ememar.2022.100907
M3 - Journal article
AN - SCOPUS:85129731407
SN - 1566-0141
VL - 52
JO - Emerging Markets Review
JF - Emerging Markets Review
M1 - 100907
ER -