Corporate Social Responsibility, Ethics and Sustainable Prosperity

Sabri Boubaker, Duc Khuong Nguyen

• Publisher: WSPC
• Year: 2019
• ISBN:
  9789811206894
• Topic: Negocios y empresa
• Subtopic: Ética empresarial

Corporate activities are not only drivers of economic growth but also key actors of the changes towards more sustainable markets and environment as well as inclusive development. Significant efforts have recently been devoted to transform private and public firms alike from pure economic-oriented organizations to entities that deliberately and diligently create value without neglecting social and environmental implications of their activities. Firm performance, resilience, and survival are nowadays, more than ever before, dependent on how they consciously and purposefully engage in appropriate corporate social responsibility (CSR) strategies and actions.

This book, Corporate Social Responsibility, Ethics and Sustainable Prosperity, will provide all readers, including investors, managers, lawmakers, and policymakers with an up-to-date, comprehensive, and thoughtful coverage of CSR and ethical issues at the crossroads of different finance and management disciplines. It contains a rich collection of insightful studies covering a wide range of topics in corporate ethics, CSR, and sustainable prosperity. Together, these studies help readers deepen their knowledge on different country environments and various organizational forms, policies, and activities. The book is composed of 16 chapters which are divided into two interconnected parts: Part I addresses ESG and ethical issues in corporate decision-making, while Part II provides insights towards sustainable prosperity.

Contents:

• About the Editors
• List of Contributors
• Acknowledgements
• ESG and Ethical Issues in Corporate Decision-Making:
  • What Drives Corporate Social Performance? The Role of Espoused National Cultural Values (Namporn Thanetsunthorn and Rattaphon Wuthisatian)
  • Corporate Social Performance and Financial Risk: Evidence from European Firms (Blaise W Sandwidi and Alexis Cellier)
  • Determinants of Internal Fraud and Improper Business or Market Practices in Financial Institutions (Jörg Prokop and Suren Pakhchanyan)
  • Financial and Social Efficiencies of Microfinance Institutions: A Malmquist Productivity Index (MPI) Approach (Lâma Daher and Erwan Le Saout)
  • Corporate Governance and Environmental Performance: A Systematic Overview (Ivan Miroshnychenko, Roberto Barontini, and Francesco Testa)
  • Why Do Firms Engage in CSR? Theories, Institutions, and Models of Capitalism (Concetta Carnevale)
  • Convergence of Corporate Governance and CSR: Ideological Perspectives (Ivan Miroshnychenko)
• Towards Sustainable Prosperity:
  • Value Creation Through a Circular Economy (Brian Bolton)
  • The Future of Financing for Sustainability in Asia and the Potential Role of the Asian Infrastructure Investment Bank (Alice de Jonge)
  • Towards a Global Financial System for Sustainability: Implications for an Emerging Global Financial Center (Artie W Ng and Vincent T Law)
  • Green Finance: Across the Universe (Kathrin Berensmann and Nannette Lindenberg)
  • The History of Ethical, Environmental, Social and Governance oriented Investments as a Key to Sustainable Prosperity in the Finance World (Julia M Puaschunder)
  • Towards Sustainable Finance Conceptualization (Sonia Rebai, Mohamed Naceur Azaiez, and Dhafer Saidane)
  • Sustainable Value Money: Why it is Needed, How to Get it? (Shann Turnbull)
  • Extended Corporate Sustainability Disclosure: Turkish Banking Sector (Güler Aras, Nuray Tezcan, and Ozlem Kutlu Furtuna)
  • Bank Use of Corporate Social Responsibility and Sustainability Information in Lending Decisions (Omer Elsakit and Andrew C Worthington)

Readership: Academic researchers and graduate students in law, economics, management and finance, professionals such as investors, lawmakers, policymakers, international organizations interested in CSR and ethical practices.Corporate Social Responsibility;Ethics;Sustainable Prosperity;Corporate Decision Making;Corporate Social Performance;Fraud;Microfinance Institutions;Financial Institutions;Environmental Performance;Corporate Governance;Value Creation;Circular Economy;Asian Infrastructure Investment Bank;Green Finance;Sustainable Value Money;Turkish Banking Sector;Lending Decisions0 Key Features:

• This book is an invaluable resource for anyone willing to understand corporate social responsibility (CSR), ethical practices, and sustainability in a fast and ever-changing world
• This book features a rich collection of insightful studies covering a wide range of issues and topics in CSR, ethics and sustainability
• The book chapters were written by academics and professionals, with hands-on experience and long expertise in CSR, sustainability and ethical questions
• This book is intended to provide the readers with an in-depth understanding of CSR practices and firm ethics that contribute to a more sustainable world
• This book offers us a unique opportunity to broaden our understanding of the various aspects of corporate ethics, ESG and sustainable prosperity in developed and emerging economies alike
• This book helps not only academic researchers and graduate students in law, economics, management and finance, but also professionals such as investors, lawmakers, policymakers and international organizations deep their knowledge on the determinants and effects of various CSR and ethical practices

Part I

ESG and Ethical Issues in Corporate Decision-Making

Chapter 1

What Drives Corporate Social Performance? The Role of Espoused National Cultural Values

Namporn Thanetsunthorn^∗ and Rattaphon Wuthisatian^†

^∗Pennsylvania State University-Shenango, United States
^†Southern Oregon University, United States

The study examines the impact of national culture on the four important aspects of corporate social responsibility (CSR) — community (COM), employee (EMP), environment (ENV), and governance (GOV). An empirical analysis is based on socially responsible performance of 8,333 corporations from 59 countries across nine different regions around the globe. The findings suggest that Hofstede’s four dimensions of national culture — power distance (PDI), individualism (IDV), masculinity (MAS), and uncertainty avoidance (UAI) — have significant impacts on socially responsible corporate performance, either positively or negatively, depending on a given aspect of CSR. Overall, the results explain substantial variations in the effects of different cultural typologies on the corporate social performance and are consistently robust across a variety of statistical methods, including ordinary least squares (OLS) regression, regression with robust standard error, censored normal regression (Tobit), and regression with the inclusion of industry-specific variables. The findings of this study establish useful strategic implications of CSR for business corporations and policymakers, as well as guidance for further academic inquiries.

1.Introduction

Corporate social responsibility (CSR), a concept that has been around for well over 60 years, has become increasingly significant in recent times [Broomhill, 2007]. Not only has CSR become a key topic among businesses and governments [Buhr and Grafström, 2004], but a body of academic literature on CSR has also emerged significant around the CSR topic [Campbell, 2007; Margolis and Walsh, 2003; Walsh et al., 2003].

Nevertheless, little theoretical and empirical attention has been paid to understanding what key factors drive socially responsible corporate behavior or what conditions affect the ability of a corporation to achieve its CSR strategic goals. Indeed, much of the literature on CSR focuses on determining whether corporations ought to engage in CSR [e.g. Friedman, 1970; Jensen, 2002; Levitt, 1958; Porter and Karmer, 2002; Prahalad and Hammond, 2002], and most often the emphasis is on the extent to which engaging in CSR initiatives affects financial performance [see Margolis and Walsh, 2003].

Recently, there has been a growing body of comparative research that seeks to identify the key factors determining socially responsible corporate behavior. However, these efforts give precedence to exploring the formal institutional conditions under which corporations are more or less likely to engage in CSR initiatives. The formal institutional determinants of CSR engagement most often found in the literature involve economic development and public and private regulations, as well as the presence of nongovernmental and other social movement organizations that monitor corporate behavior [Campbell, 2007; Chih et al., 2010; Moon, 2004]. Little attention has been paid to investigating how informal institutional factors, particularly national culture, affect the degree to which corporations engage in CSR and behave in socially responsible ways [Maignan, 2001; Maignan and Ralston, 2002; Margolis and Walsh, 2003].

Traditionally, business corporations are believed to be embedded in the larger society in which they operate, and the characteristics of national culture are the predetermined determinants that shape corporate culture [Allaire and Firsirotu, 1984; Aoki, 1990; Axel, 1995; Basu and Miroshnik, 2003; Hofstede, 1980a, 1994]. The influence of national culture determines the degree to which corporations act in socially responsible ways and design their CSR-oriented approach [Habisch et al., 2005; Svensson et al., 2009]. Thus, CSR cannot be understood in isolation from the national cultural context.

From this perspective, several scholars support the idea that the national culture can be a driver that determines the corporation’s specific type or preference of CSR activities. For example, Habisch et al.’s (2005) study of 23 national perspectives on the CSR issue provides a comprehensive understanding of CSR development and its progress in each country. The study argues that national culture is the critical predictor that determines the corporation’s CSR initiatives. Svensson et al.’s [2009] study of firms in Australia, Canada, and Sweden over two time periods (2001–2002 and 2005–2006) also supports this conceptual framework. The study reveals that ethical structures and processes are different among those corporations and concludes that the way in which corporations outline their approach to business ethics depends on the national culture where they are domiciled. Visser [2008] explores differences of CSR in developing countries as opposed to developed countries. The study mentions cultural tradition as an internal driver of CSR.

Recently, there has been a growing body of literature on the linkages between national culture and CSR. The linkages have been quantified extensively in the existing literature using Hofsetde’s four cultural dimensions and corporations’ CSR performances derived from a wide variety of reliable data sources. To date, there is still, however, no consensus regarding how each cultural dimension impacts CSR performance. For instance, Ringov and Zollo [2007] empirically examine the effect of national culture on the social and environmental performance of 463 corporations located in 23 North American, European, and Asian cities. The results suggest that power distance and masculinity (MAS) have significant negative effects on the social and environmental performances of the corporations. In their seminal work, Peng et al. [2012] apply the binary regression model on the datasets of the Dow Jones Sustainability index and the Compustat Global Vantage containing 1,189 corporations and also observe the significant negative impact of power distance and MAS on the CSR engagement. On the other hand, Ho et al. [2012] alternatively report the positive impact of power distance and MAS on corporate social performance among 3,680 companies from 49 developed and developing countries across North America, Europe, and Asia-Pacific.

The effect of individualistic culture on CSR is also reported differently in the existing literature. While Ringov and Zollo [2007] suggest no relationship between individualism (IDV) and CSR, Ho et al. [2012] and Peng et al. [2012] report a significant impact of IDV on CSR; Peng et al. [2012] report a positive effect of IDV on CSR, but Ho et al. [2012] suggest a negative effect. With regard to the effect of uncertainty avoidance culture on CSR, conclusive findings still do not exist. Peng et al.’s [2012] and Ho et al.’s [2012] studies show the positive relationship between uncertainty avoidance and CSR, whereas Ringov and Zollo [2007] report no significant effect of uncertainty avoidance on CSR.

In the work of Thanetsunthorn [2014], causal analyses considering the effect of national culture on different dimensions of CSR — community (COM), employee (EMP), environment (ENV) — across different regions of Asia including Eastern Asia, Asia-Pacific, South Asia, and Southeast Asia — are established. The study suggests that a greater home country bias in favor of individualistic culture is significantly and negatively associated with CSR on the aspects of community, employee, and environment. Uncertainty avoidance culture alternatively produces positive impacts on community, employee, and environment dimensions of CSR. Further, higher MAS of a culture has a negative impact on the dimensions of community and employee. The study also shows that there is no relationship between power distance culture and CSR.

An elaboration of the relationship between national culture and CSR is also shown in the comparative study of Thanetsunthorn [2015] based on CSR performance of 3,055 corporations from 28 countries located in Eastern Asia and Europe. The findings suggest that cultures with high level of MAS score lower in CSR on the dimensions of community and employee. Higher power distance and IDV of a culture have negative impacts on community, employee, and environment. A high level of CSR on community and environment is associated with a low level of uncertainty avoidance.

Though this topic has progressed substantially, there are still crucial gaps in our knowledge about the effect of national culture on CSR. As discussed above, Ringov and Zollo [2007], Ho et al. [2012], Peng et al. [2012], and Thanetsunthorn [2014, 2015] report interesting evidence indicating the causal relationship between national culture and CSR. The present study differs from these previous studies along several important dimensions. To our knowledge, our study is the first one disclosing this empirical question through the use of global data containing information on 8,333 corporations from 59 countries in nine different regions. We also believe that our study is unique in its examination by distinguishing the effects of national culture on CSR from the effects of geographic region. Moreover, the mentioned authors do not study a wide variety of CSR dimensions, that is, the overall rating of corporate social performance is used as a measure of CSR despite the fact that CSR also encompasses several important aspects of social contributions [Rowley and Berman, 2000; Waddock and Graves, 1997]. At least according to Hancock [2005], CSR is divided into four important aspects: community, employee, environment, and governance. In contrast, our study focuses on these aspects by comparing the effects of national cultures on all the four different dimensions of CSR. In view of the potential implications of our results, we are confident that our results may be beneficial to a consideration of the strategic implications of CSR.

The remainder of this chapter is structured as follows. Section 2 discusses Hofstede’s [1980a, 1980b, 2001] four dimensions of national culture — power distance index (PDI), IDV, MAS, and uncertainty avoidance index (UAI) — and the findings of previous studies for establishing our main hypotheses. Section 3 describes the collection of data and its sources with a rationale for selecting the research data. This is followed by the empirical strategy including model specifications testing for the impact of national culture on CSR. Section 4 provides descriptive statistics for the dataset and reports our empirical results. Section 5 presents a summary of noticeable facts and main findings of this study. Finally, Section 6 concludes the chapter with implications for business practices and suggestions for future research.

2.Hypotheses

2.1.Hofstede’s Four Dimensions of National Culture

A recent and much heralded empirical model of culture developed by Hofstede [1980a] is valuable for connecting culture to CSR. In essence, Hofstede’s work is acknowledged as “one of the most extensive cross-cultural surveys conducted” [Gray, 1988, p. 5], which results in a concise framework of dimensions for differentiating national cultures [Jaeger, 1986]. The definitions of culture and the proposed dimensions are consistent with those identified in a body of social science literature [Gray and Verma, 1998]. Testimony to the recognition of Hofstede’s work is a great deal of cross-cultural research in a wide variety of settings and disciplines that employs Hofstede’s cultural findings as the theoretical framework. In particular, Hofstede’s [1980a, 1980b] model of national culture distinguishing each country’s culture from one another can be categorized into four principal dimensions: power distance, IDV versus collectivism, MAS versus femininity, and uncertainty avoidance. These are concisely described by Hofstede as follows:

•Power distance refers to “the extent to which a society accepts the fact that power in institutions and organizations is distributed unequally” [Hofstede, 1980b, p. 45].

•IDV versus collectivism “implies a loosely knit social framework in which people are supposed to take care of themselves and their immediate families only, while collectivism is characterized by a tight social framework in which people distinguish between in-groups and out-groups; they expect their in-group (relatives, clan, organizations) to look after them, and in exchange for that they feel they owe absolute loyalty to it” [Hofstede, 1980b, p. 45].

•MAS versus femininity refers to “the extent to which the dominant values in society are — masculine” that is, assertiveness, the acquisition of money and things, and not caring for others, the quality of life, or people” [Hofstede, 1980b, p. 46].

•UAI is “the extent to which a society feels threatened by uncertain and ambiguous situations by providing career stability, establishing more formal rules, not tolerating deviant ...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Preface
• About the Editors
• Acknowledgments
• List of Contributors
• Contents
• Part I: ESG and Ethical Issues in Corporate Decision-Making
• Part II: Towards Sustainable Prosperity
• Index