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Corporate social responsibility and firm performance: The moderation of investment horizon and corporate governance

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  • Abdul Waheed
  • Shahzad Hussain
  • Hasan Hanif
  • Hamid Mahmood
  • Qaisar Ali Malik

Abstract

The current study proposes an integrated theoretical frame work, to explain the moderating role of institutional investors, their investment horizon and corporate governance mechanism in the sustainability of corporate social responsibility (CSR) and firm’s performance nexus. The proposed model explains how, the positive association between CSR and firm performance relationship, established on the basis of the stakeholder and corporate citizenship theories, can be further strengthened (effective monitoring hypothesis) or weakened (myopic institutions theory) by the presence of institutional investors in the firm’s ownership structure and corporate governance mechanism (agency theory). The study tested the proposed model on the unbalanced sample of 327 non-financial firms listed on the Pakistan stock exchange (PSX). The study concludes that, based on the agency theory, institutional investors (as a homogeneous group) positively moderates the CSR and firm performance relationship. However, agency theory failed to explain the negative moderation of short term investment horizon institutional investors and firm performance. The study further confirms the agency role of effective corporate governance mechanism in the sustainable CSR and firm performance relationship. The current study explored some of the major theoretical contradictions in the field of corporate finance literature, which are puzzling for the practitioners and scholars.

Suggested Citation

  • Abdul Waheed & Shahzad Hussain & Hasan Hanif & Hamid Mahmood & Qaisar Ali Malik, 2021. "Corporate social responsibility and firm performance: The moderation of investment horizon and corporate governance," Cogent Business & Management, Taylor & Francis Journals, vol. 8(1), pages 1938349-193, January.
    • Handle: RePEc:taf:oabmxx:v:8:y:2021:i:1:p:1938349
    DOI: 10.1080/23311975.2021.1938349
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    Citations

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    Cited by:

    1. Ying Schwarte & Ping He, 2024. "The effects of institutional investors and munificence on board chair orientations," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 28(4), pages 1049-1077, December.
    2. Anjali Kaimal & Shigufta Hena Uzma, 2024. "CSR and ownership structure: Moderating role of board characteristics in an emerging country context," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(5), pages 4933-4955, September.
    3. Patrick Velte, 2023. "Which institutional investors drive corporate sustainability? A systematic literature review," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 42-71, January.
    4. V. Veeravel & E. K. S. Sadharma & Bandi Kamaiah, 2024. "Do ESG disclosures lead to superior firm performance? A method of moments panel quantile regression approach," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(1), pages 741-754, January.
    5. Collins Kankam-Kwarteng & George Nana Agyekum Donkor & Francis Osei & Ofosu Amofah, 2024. "Do corporate social responsibility and corporate image influence performance of the financial sector?," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 29(2), pages 306-317, June.

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