Corporate social responsibility misconduct and formation of board interlocks

Yujie Wang, Albert Tsang, Yi Xiang and Yao, Daifei (Troy)

Journal of Financial Stability, 2023, vol. 67, issue C

Abstract: Corporate social responsibility (CSR) misconduct often negatively impacts firms and damages their reputation. Using data on U.S. listed firms from 2002 to 2018, we demonstrate that firms are more likely to establish board interlocks with firms that have better CSR performance after a CSR-related violation than with other firms. Furthermore, this relationship is more pronounced in violating firms that have a greater incentive to maintain their reputation than in other firms. We also find that the capital market and the media react positively to board interlock announcements by violating firms. However, we find no improvement in future CSR performance or a reduced likelihood of future CSR misconduct after the formation of such board interlocks. Altogether, our findings suggest that establishing board interlocks with firms that have better CSR performance is an effective signaling strategy for reputation management for firms engaging in CSR misconduct.

Keywords: Board Interlocks; Corporate Social Responsibility; Violations; Reputation (search for similar items in EconPapers)
JEL-codes: G3 M14 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:67:y:2023:i:c:s1572308923000621

DOI: 10.1016/j.jfs.2023.101162

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