Corporate governance, corporate social responsibility and firm performance: The role of country characteristics

Author Identifier


Date of Award


Document Type

Thesis - ECU Access Only


Edith Cowan University

Degree Name

Doctor of Philosophy


School of Business and Law

First Supervisor

Hadrian Geri Djajadikerta

Second Supervisor

Saiyidi Mat Roni

Third Supervisor

David Xiang


This study attempts to address calls to revisit the relationship between corporate governance (CG) and corporate social responsibility (CSR) in an international setting comprising diverse institutional factors. Building on legitimacy theory, this study investigates how firm-level CG interacts with country-level institutional factors to determine CSR. The primary objective of this study is to establish a relationship between CG and CSR through environmental and social disclosures. Secondly, the study examines whether country characteristics, specifically legal origin, national culture and economic growth, influence the established relationship between CG and CSR. Thirdly, the study explores whether the relationship between CG and CSR has implications for firm performance (FP) measured through accounting-based return on equity (ROE) and market-based price to book ratio (PB). Lastly, it examines whether the interaction of country characteristics with firm-level CG influences FP through the CSR channel.

By analysing quantitative data of 5,769 firms from 70 countries for the year 2017, this study demonstrates that CG is positively associated with both environmental and social components of CSR. To estimate how CG (indirectly) affects FP through CSR in an integrated model, a Hayes’ conditional process analysis based on 5,000 bias-corrected and accelerated bootstrap samples was employed. Results show that CSR serves as an effective medium in transmitting the positive effects of CG on FP. However, this indirect effect enhances ROE through the social component, whereas it reduces the PB via the environmental component. Moreover, the extent and strength of this indirect effect are contingent on the type of country characteristics that modify the CG–CSR relationship.

The indirect effect of CG on FP is more pronounced in countries with higher levels of uncertainty avoidance and long-term orientation and lower degrees of power distance and individualism. Additionally, the presence of a civil law (compared with the common law) legal system and weaker economic growth in a country reinforce these associations. Regarding the profit and value relevance of CSR, the study produced mixed findings, whereby the environmental component was negatively, and the social component positively related to both ROE and PB. To ensure the robustness of the results, two estimation techniques, namely, traditional (hierarchical multiple regression based on p-value) and robust (bootstrapping based on confidence intervals), were employed; results were consistent for both.

To date, little is known about how firm-level CG interacts with the institutional environment in determining CSR, which may have a bearing on a firm’s performance. By exploring the demeanour of the CG–CSR relationship under diverse country characteristics and associating it with a firm’s profitability and market value, this study addresses a significant gap in the existing literature. Additionally, the research builds upon and advances the debate on the significance of contextual factors, which have largely been overlooked in the literature on the CG–CSR relationship. These institutional factors could be the major reason behind the indecisive findings on the CG–CSR relationship. This study provides deeper insights into the relevance of the institutional environment while integrating governance, CSR and FP at the corporate level. These findings are valuable for academicians, practitioners, regulators and other stakeholders (i.e., customers, shareholders, investors and community groups) who are interested in promoting corporate sustainability and enhancing FP through the CG–CSR nexus.

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