The Influence of Corporate Governance on Corporate Social Responsibility: Evidence from an Emerging Market

Abstract

The study aims to investigate further the nexus between corporate governance and corporate social responsibility practice using a sample of Sri Lankan public listed firms during the period 2012-2017. Corporate social responsibility reporting practices are affected by institutional mechanisms and firm-level corporate governance factors. Studying the relationship between corporate governance and corporate social responsibility practice in an emerging market is imperative because emerging market settings are characterised by institutional voids. This study adopts two econometric methods developed by Beck and Katz (1995) and Driscoll and Kraay (1998) to tackle the potential problems of heteroscedasticity, cross sectional dependence, and autocorrelation that might be present in the panel data set. This study finds that the larger size of the audit committee is a significant determinant of corporate social responsibility and fails to find evidence of the rest of the studied corporate governance variables in Sri Lanka. Instead, firms operating in Sri Lanka may engage in CSR to fill the institutional voids.