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BEST IN CLASS BUT BIG WRONGDOERS: Exploring the financial performance and human rights infringe ments nexus in large emerging country companies

Elisa Giuliani, Federica Nieri and Andrea Vezzulli ()

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: Traditionally, financial distress and lack of access to opportunities have been seen as among the most important determinants of corporate wrongdoing. Applying performance feedback theory to the context of emerging country companies (ECCs), we seek to show that the biggest wrongdoers are ‘best in class' companies with better performance than that of their industry peers. Using an original dataset, we examine the involvement in business-related human rights controversies (HRCs) for a sample of 245 large public companies from Brazil, China, India, Malaysia, Mexico, Russia, South Africa, and Thailand during the period 1992-2012. We find ECCs with good financial performance (relative to their industry peers) are more likely to be involved in HRCs but that this probability is attenuated if these companies invest in host countries characterized by strong regulatory enforcement which demonstrates the importance of internationalization for reducing wrongful business conduct. We find evidence also that firm self-regulatory policies (i.e. adoption of corporate social responsibility policies) work to mitigate the probability of high performers violating human rights in the conduct of their business. We discuss the contribution to research on the antecedents to corporate wrongdoing, and for performance feedback theory.

Keywords: Performance feedback theory; Human rights controversies (HRCs); Corporate wrongdoing; Emerging country companies (ECCs); Regulatory enforcement; Corporate social responsibility (CSR) (search for similar items in EconPapers)
JEL-codes: C23 F23 K40 M14 (search for similar items in EconPapers)
Date: 2019-12-01
New Economics Papers: this item is included in nep-cis, nep-law and nep-sea
Note: ISSN 2039-1854
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