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Cultural diversity among directors and corporate social responsibility

Olga Dodd, Bart Frijns and Alexandre Garel

International Review of Financial Analysis, 2022, vol. 83, issue C

Abstract: We examine the relationship between board diversity and a firm's corporate social responsibility (CSR) performance in a novel way. The relation between visible forms of board diversity (gender, ethnic, age diversity) and CSR may arise endogenously due to visible diversity management. In contrast, we focus on cultural diversity (based on directors' ancestry), which is less visible. We demonstrate that cultural diversity, unlike visible diversity, is not considered in director replacements, consistent with cultural diversity not being affected by firms signaling their CSR commitment by ‘looking’ diverse. We show that board cultural diversity is positively related to CSR performance. This result holds when we control for visible board diversity, directors' foreignness and diversity in nationalities, and endogeneity. We also show that CSR performance decreases when a firm increases its visible board diversity at the cost of cultural diversity.

Keywords: Corporate social responsibility; Board diversity; Cultural diversity; Ancestry; Board of directors (search for similar items in EconPapers)
JEL-codes: G3 G34 G39 M14 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.irfa.2022.102337

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