The Influence of Family Ownership on Corporate Social Responsibility: An International Analysis of Publicly Listed Companies

Abstract

Manuscript Type: EmpiricalResearch Question/Issue: We investigate the impact of family equity holdings on three indicators of corporate social responsibility: environmental, social, and governance (ESG) rankings. We further evaluate how firm governance mediates the effect of family ownership on environmental and social improvements and how national governance systems influence the response of family holdings to ESG. Research Findings/Insights: Based on a sample of 23,902 firm-year observations drawn from 2002 to 2012 covering 46 countries and 3,893 firms, our findings show that both closely held equity and family ownership are negatively associated with ESG performance. When we control for governance, closely held equity is no longer associated with environmental and social rankings, but family ownership retains a significant negative association. These results are strong and consistent across liberal market economies (LME), whereas coordinated market economies (CME) exhibit generally weaker results and considerable diversity. Japan stands out as different from the other countries examined in depth. Theoretical/Academic Implications: Our results are consistent with agency relationships driving decisions concerning ESG commitment in LMEs. They also emphasize the role of institutional differences given the weak and variable association between ownership and ESG in CMEs. We show that families may be able to influence decisions, possibly through participation in management, despite normally effective governance constraints. As the impact of ownership and governance varies across economies and ownership type, this implies that both agency and governance should be evaluated in the context of the economic environment. Practitioner/Policy Implications: Our results offer insights to regulators and policy makers who intend to improve ESG performance. The results suggest that encouraging diversified ownership is particularly important in LMEs, that improvements in governance may benefit social and environmental performance where equity is closely held by institutions, but that governance may be less effective in the presence of family ownership.

Environmental strategy in the global banking industry within the varieties of capitalism approach: The moderating role of gender diversity and board members with specific skills

“…This leads us to accept the first hypothesis. This evidence demonstrates that banks domiciled in CME contexts are more likely to report environmental information than banks operating in LME cultures, consistent with evidence provided by Carnevale and Mazzuca () and Rees and Rodionova (). This finding suggests that financial entities operating in CME countries tend to disclose more environmental issues than banks in LME contexts because CMEs are more orientated towards stakeholders.…”

Corporate Social Responsibility Reporting and Varieties of Capitalism: an International Analysis of State‐Led and Liberal Market Economies

“…For these authors, there is also a certain consistency in LMEs. Rees and Rodionova (2015) also agree that LMEs have high levels of investor protection and other stakeholders have to move their agendas along through market mechanisms, such as stakeholder activism. According to Kang and Moon (2012), firms linked to this variety of capitalism are considered to be focused on the interests of investors and managers as key actors.…”

“…Unions could motivate companies to act on issues related to the health and safety of their employees and the community at large (Ioannou & Serafeim, 2012). In addition, Rees and Rodionova (2015) consider that firms in this kind of institutional environment face pressures to participate in social and environmental practices. In this regard, Fransen (2013, p. 215) considers that these 'countries are characterised amongst others by institutionalised dialogue between social partners and more stringent rules in policy areas relevant to CSR, such as labour standards and environmental protection'.…”

Do Compensation Consultants Drive Up CEO Pay? Evidence from UK Public Firms

“…We apply quantile regression methods to test whether the effect of compensation consultants differs at different quantiles of CEO pay distribution (this line of reasoning is motivated by Rees and Rodionova, 2015). We assume that the relationship we find between consultants and CEO pay could be due to compensation consultants having a direct influence on CEO pay, or to firms with certain pay levels being more likely to hire consultants.…”