Research Question/Issue This paper investigates whether assigning CSR-specific expertise to the board committee legally responsible for CSR improves compliance with mandatory CSR law and shapes how firms organize that compliance. Research Findings/Insights Using Indian listed companies subject to mandatory CSR regulation, we find that CSR expertise on CSR committees is associated with higher compliance and more concentrated CSR activities across categories and locations. These associations are stronger among firms facing greater competitive or financial pressures and those without prior CSR engagement. High compliance combined with CSR expertise is also associated with higher firm value, improved creditworthiness, and greater institutional ownership. Theoretical/Academic Implications Our findings highlight how directors with CSR expertise help companies improve legal compliance with mandatory CSR regulations and pursue more focused CSR strategies. This research identifies committee-level CSR expertise as an important governance mechanism shaping both regulatory compliance and the organization of CSR activities. It demonstrates the benefits of embedding CSR expertise within board structures. Practitioner/Policy Implications We provide evidence that directors with CSR expertise and stronger compliance positively affect firm outcomes. Governments and policymakers could use these findings to promote CSR expertise on corporate boards, incentivize compliance, and promote the convergence of financial and social goals. Our study provides empirical support for recent public policies, including the 2020 EU recommendation to appoint sustainability experts on corporate boards.
Research Question Based on relational and resource dependence theories, this study investigates the impact of supplier equity stakes in customers (SESC) on audit fees and its underlying mechanisms from the perspective of auditors' behavioral decision-making.Research Findings The findings reveal that SESC significantly reduces audit fees, supporting the collaboration hypothesis. Mechanism analysis indicates that SESC lowers audit fees by reducing operational risk and audit complexity. Heterogeneity analysis shows that the effect of SESC on reducing audit fees is weakened when the holding level is high, the duration is short, and the supplier is state-owned, whereas when the firm's external bargaining power and industry monopoly power are low, this reduction effect is enhanced.Theoretical Implications This study enriches the literature on supply chain characteristics by examining equity relationships and enriches the literature on the influence of supply chain characteristics on auditors' behavioral decisions from the perspective of SESC. Furthermore, this study extends the comprehension of SESC in corporate governance and auditing practices through the theoretical lens of relational theory and resource dependence theory.Practitioner Implications First, enterprises should recognize the strategic role of SESC in modern supply chain management and actively cultivate and develop this innovative relationship to enhance supply chain resilience and security. Second, auditors should pay heightened attention to changes in SESC to effectively evaluate supply chain stability and adjust audit workloads accordingly. Lastly, policymakers should strengthen policy support and incentive mechanisms for supply chain equity holding practices.
Research Question/Issue This study examines the relationship between classified boards and firms' environmental and social (E&S) performance. We ask whether the insulation associated with classified boards is related to firms' sustainability outcomes and whether external monitoring and investor horizon condition this relationship.Research Findings/Insights Using 14,066 US firm-year observations from 2002 to 2020, we find that firms with classified boards exhibit significantly lower overall E&S performance. This negative association is concentrated in the environmental dimension. The adverse association with E&S performance is weaker among firms subject to stronger institutional monitoring and, in particular, among firms with greater long-term institutional ownership. We further find that classified boards are associated with a higher incidence of negative E&S events and greater disagreement across ESG rating providers. Finally, classified boards are negatively associated with firm value, and our path analysis is consistent with E&S performance and rating disagreement serving as channels linking board structure to valuation. Our results are robust to using instrumental variable estimation, and entropy balancing.Theoretical/Academic Implications Our findings are consistent with the managerial entrenchment view of classified boards. Although classified boards may provide stability and protection from short-term market pressures, the evidence suggests that this insulation can be associated with weaker accountability and lower engagement in sustainability-related activities. The study contributes to the corporate governance literature by showing that the implications of classified boards extend beyond conventional shareholder outcomes to stakeholder-oriented, non-financial outcomes. It also contributes to the ESG literature by identifying board structure as an important correlate of both corporate E&S performance and disagreement among ESG rating providers.Practitioner/Policy Implications The findings have implications for investors, corporate boards, and policymakers evaluating the costs and benefits of classified boards. Shareholders may wish to consider the potential E&S consequences of board classification, particularly in firms where external monitoring is weak. More broadly, the results suggest that institutional monitoring and long-term ownership can play an important role in mitigating the adverse E&S associations of classified boards. For policymakers, the evidence is relevant to debates over board declassification, director accountability, and the governance of corporate E&S activities.
Research Question/Issue We investigate whether a quasi-official minority shareholder, the China Securities Investor Services Center (CSISC), affects firms' investor relations management when it actively exercises its shareholder rights in listed firms.Research Findings/Insights We employ a machine learning-based algorithm to estimate response quality scores from over 4 million question-and-answer (Q&A) interactions involving all A-share listed firms on the Shenzhen and Shanghai Stock Exchanges between 2009 and 2022. Using a staggered difference-in-differences research design, we find that the active exercise of shareholder rights by a quasi-official shareholder enhances corporate communication with stakeholders and increases minority shareholder participation and attendance at annual shareholders' meetings. Cross-sectional analyses further reveal that the effects are more pronounced among firms with lower board independence, those audited by smaller audit firms, and firms with limited analyst coverage.Theoretical/Academic Implications These findings contribute to the broader understanding of mechanisms that support minority shareholder protection and engagement in the governance of Chinese listed firms and highlight the potential of structured shareholder activism in amplifying minority voices and creating value in capital markets.Practitioner/Policy Implications The evidence indicates that CSISC's shareholder activism enhances corporate communication, fosters inclusive and transparent governance, and reduces information asymmetry, particularly benefiting minority shareholders. For managers and boards, high-quality investor communication helps reduce the reputational and valuation costs associated with increased governance scrutiny.
ABSTRACT Research Question/Issue This study investigates why and how US multinational enterprises (MNEs) engage in philanthropic giving to foreign countries, exploring whether enforcement actions under the US Foreign Corrupt Practices Act (FCPA) influence such giving behavior. Research Findings/Insights Using FCPA enforcement actions as reputational and enforcement shocks, we find that while firms directly implicated in violations (focal firms) do not alter their foreign philanthropic giving, peer MNEs operating in the same host countries significantly increase their donations. This increase is consistent with peer firms using philanthropy strategically to mitigate reputational spillovers, manage heightened enforcement risk, and build reputational capital. We establish these findings using a stacked difference‐in‐differences design. Theoretical/Academic Implications The study advances the literature on corporate philanthropy by identifying cross‐border enforcement shocks and peer effects as key determinants of international corporate philanthropy. We further contribute to research on nonmarket strategies by demonstrating that philanthropy can serve as a strategic response to regulatory and reputational risks. Practitioner/Policy Implications Our findings suggest that antibribery enforcement can influence corporate social behavior beyond focal firms, prompting philanthropic responses among peer MNEs operating in the same host country. Policymakers and regulators should consider these spillover effects when designing enforcement strategies. Likewise, corporate practitioners should recognize international philanthropy as a strategic tool for managing global compliance and legitimacy.
