Journal of Accounting Review  2020/07
Vol.71   1-39
DOI:10.6552/JOAR.202007_(71).0001

The Impact of Board Interlocks and Specialized CSR Assurance Providers on Corporate Social Responsibility Performance

Abstract

This paper investigates the influence of director interlock on firms’ corporate social responsibility (CSR) performance. We argue that firm managers will follow their interlocking partner’s CSR disclosure practice when managing their own disclosure strategy and then affect their CSR performance. Using board interlocks to proxy for network connections and CSR award-winning as a surrogate for CSR performance, we find that corporate CSR performance is positively related to its ties to high CSR firms. Such finding indicates that CSR performance can spread across firms through director interlock. In addition, board ties to high CSR firms assured by a specialized CSR assurance provider have more influence on the focal firms’ CSR performance compared with ties to high CSR firms assured by a non-specialized CSR assurance provider. Further, board ties to high CSR firms are even more influential when the focal firm and its interlocking partners hire the same specialized CSR assurance provider. Our results are robust to alternative measure of CSR performance based on KLD ratings and remain essentially unchanged under alternative model specifications. Taken together, our findings suggest that the character of a firm’s board ties plays a role in the effect of those ties on the firm’s CSR performance.