This week the focus is on the effect of different ownership structures on levels of CSR.

Does ownership structure matter for CSR?
The extant literature has examined the effects of ownership structures on corporate social responsibility (CSR), yet it has overlooked the non-linear and interactive effects among major shareholder groups. In this study, the authors examine the non-linear effects of insider and institutional ownerships on CSR.

The authors also examine whether it is necessary to have both incentive alignment and monitoring mechanisms (complementary view) or it is sufficient to have either mechanism (substitutive view) to promote CSR. Using a sample of the U.S. Fortune 1000 firms, results suggest that insider and institutional ownerships have non-linear effects on CSR.  The authors also find support for the complementary mechanisms view, in that the highest CSR rating is observed when both ownership levels are high.

Therefore, firms need to maintain strong governance structures to realise synergistic effects in promoting CSR. Our findings provide a more in-depth understanding of the relationships between ownership structures and corporate social outcomes.

Won-Yong Oh, Jongseok Cha and Young Kyun Chang. 2017. Does Ownership Structure Matter? The Effects of Insider and Institutional Ownership on Corporate Social Responsibility. 
Journal of Business Ethics, 146(1), 111–124.


How is institutional ownership related to CSR?  
This study examines the relation between corporate social responsibility (CSR) and institutional investor ownership, and the impact of this relation on stock return volatility.  The authors find that institutional ownership does not strictly increase or decrease in CSR; rather, institutional ownership is a concave function of CSR.

This evidence suggests that institutional investors do not see CSR as strictly value-enhancing activities. Institutional investors adjust their percentage of ownership when CSR activities go beyond the perceived optimal level. Employing the path analysis, the authors also examine the mediating effect of institutional ownership on the relation between CSR and stock return volatility.

The authors find that CSR decreases stock return volatility at a decreasing rate through its effect on institutional ownership. Our results remain robust under several different CSR measures and estimation methods.

Maretno Harjot, Hoje Jo and Yongtae Kim. 2017. Is Institutional Ownership Related to Corporate Social Responsibility? The Nonlinear Relation and Its Implication for Stock Return Volatility. 
Journal of Business Ethics, 146(1), 77–109.


Linking governance and asset diversions in public charities 
In the United States, the IRS now requires charities to publicly disclose any significant asset diversion, which is the theft or unauthorised use of assets, that the charity identifies during the year.  The authors use this new disclosure to investigate whether strong governance reduces the likelihood of a charitable asset diversion.

Specifically, for a sample of 1528 charities from 2008 to 2012, the authors simultaneously examine eleven measures of governance that capture four broad governance constructs: board monitoring, independence of key individuals, tone at the top, and capital provider oversight.  The authors find consistent evidence that good governance across all four constructs is negatively associated with the probability of an asset diversion. Of the eleven governance measures, the results indicate that monitoring by debt holders and government grantors, audits, and keeping managerial duties in-house are most strongly associated with lower incidence of fraud.

Our results also indicate that the likelihood of a fraud is negatively associated with a board review of the Form 990, the existence of a conflict of interest policy, and the presence of restricted donations. In addition, the authors document that the likelihood of an asset diversion is negatively associated with program efficiency and positively associated with growth and organisational complexity.

Erica Harris, Christine Petrovits and Michelle H. Yetman. 2017.  Why Bad Things Happen to Good Organizations: The Link Between Governance and Asset Diversions in Public Charities. 
Journal of Business Ethics, 146(1), 149–166.


Does family involvement explain why CSR affects earnings management?  
The authors investigate how family involvement in the ownership, management, or governance of a business affects its engagement in earnings management both directly and indirectly through its corporate social responsibility (CSR) activities.

Using a sample of S&P 500 companies, the authors find that family firms tend to have higher CSR performance, which can help them to maintain legitimacy and preserve socio-emotional wealth. Family firms also engage in less accrual-based earnings management, although they are indistinguishable from non-family firms in terms of real earnings management.

In contrast to previous research, the authors find that CSR performance is not significantly associated with either accrual-based or real earnings management behaviour after the authors account for the effect of family involvement. Our findings suggest that the association between CSR performance and family involvement is the primary driver of the relation between CSR performance and earnings management documented in previous research.

Mingzhi Liu, Yulin Shi, Craig Wilson and Zhenyu Wu. 2017. Does family involvement explain why corporate social responsibility affects earnings management? 
Journal of Business Research, 75, 8-16.


Family versus nonfamily firms: CSR disclosure and market value
The authors investigate the moderating role of family involvement in the relationship between corporate social responsibility (CSR) reporting and firm market value using a longitudinal archival data set in the French context. Our empirical results show that family firms report less information on their CSR duties than do nonfamily firms.

However, market-based financial performance, as measured by Tobin’s q, is positively related to CSR disclosure for family firms and negatively related to CSR disclosure for nonfamily firms. Family firms would benefit greatly from communicating commitment to CSR; specifically, they could obtain shareholders’ endorsement more easily than nonfamily firms could.

Mehdi Nekhili, Haithem Nagati, Tawhid Chtioui and Claudia Rebolledo. 2017. Corporate social responsibility disclosure and market value: Family versus nonfamily firms. 
Journal of Business Research, 77, 41-52.


Does family involvement affect a firm’s internationalisation?  
Internationalisation has emerged as a dominant strategy for firms in a globally interconnected world.  The authors observe that ownership structure and management have significant bearing on internationalisation strategy of family firms, as family owners and managers are more averse to internationalisation.  The authors investigate whether and how family ownership and management influence firms’ internationalisation strategy in an emerging economy in which family firms are dominant.  The authors test their predictions by using a proprietary, longitudinal panel data set of 303 leading family firms from India and find support for most of the theoretical predictions. Family firms’ aversion to internationalise is more pronounced when families can exercise greater control on firm’s action through the combined effect of higher family ownership (primarily through strategic control) and family’s participation in management (through strategic, administrative, and operational control). However, certain contingencies, such as the higher ownership of foreign institutions and presence of professional managers, help business families improve their understanding of international markets, reduce the fear of the unknown, and better appreciate the benefits of internationalisation, thereby aid greater internationalisation of family firms.

Read this article in full for free online

Ray, S., Mondal, A. and Ramachandran, K. (2018). How Does Family Involvement Affect a Firm’s Internationalization? An Investigation of Indian Family Firms.
Global Strategy Journal. doi:10.1002/gsj.1196