Do board monitoring and audit committee quality help risky firms reduce CSR controversies?

Cemil Kuzey (), Habiba Al-Shaer (), Ali Uyar () and Abdullah S. Karaman ()
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Cemil Kuzey: Murray State University
Habiba Al-Shaer: University of Stirling
Ali Uyar: CERIIM
Abdullah S. Karaman: American University of the Middle East

Review of Quantitative Finance and Accounting, 2024, vol. 63, issue 3, No 8, 1007-1045

Abstract: Abstract This study focuses on potential inhibiting and driving factors of corporate social responsibility (CSR) controversies including board monitoring intensity and audit committee quality with a particular focus on risky firms. We draw on agency, resource dependence, and slack financial resources theories to explain this association. Using an international sample between 2002–2019 and executing fixed-effects regression and Hayes’s moderation analysis methodology, we find that risky firms tend to commit more CSR controversies. Furthermore, CSR performance, firm complexity, and indebtedness exacerbate CSR controversies, whereas larger boards mitigate them. Moreover, while board monitoring intensity and audit committee quality do not prevent committing CSR controversies in absolute terms, they alleviate risky firms' CSR controversies tendency. The findings confirm agency theory and the monitoring function of the board in mitigating CSR controversies. In line with the resource dependence theory, audit committees’ independent members and members with different skills and expertise provide critical resources that help prevent CSR controversies.

Keywords: Board monitoring; Audit committee quality; Firm risk; CSR; CSR controversies (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11156-024-01280-6

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