The Influence of Ownership and Control on Corporate Social Responsibility in East Asia

Abstract

Research Question/Issue: Underpinned by an eclectic theoretical framework of agency theory and stakeholder theory, this study examines whether control by family, institutional investors, or governments affects a firm's corporate social responsibility (CSR) in East Asian firms. Research Findings/Insights: By examining 1236 firms in nine East Asian countries from 2010 to 2019, our findings show that family-controlled firms reduce their CSR engagement since family controller strengthens the agency problem. Additionally, agency conflicts between controlling shareholders and managers may be shifted onto the controller and other stakeholders. However, if institutional investors or the government have control power, they have a positive impact on firms' CSR since they act in the interests of stakeholders. Theoretical/Academic Implications: This paper addresses a lacuna in the corporate governance and CSR literature by exploring the influence of ultimate control type in East Asia, a fast-developing but under-researched context. We contribute to the understanding of agency conflicts among institutional shareholders, government, family controllers, and stakeholders within East Asian firms, particularly highlighting how controllers' behavior influences CSR outcomes. We extend the discussions on the complementarity of agency and stakeholder theories to explain why different types of ultimate controllers affect CSR. Practitioner/Policy Implications: This paper provides recommendations for embedding CSR through corporate governance, particularly in East Asia. First, for family-controlled firms, agency problems and shareholder primacy may become obstacles to achieving CSR. Corporate governance supervision policy should pay attention to when firms are controlled by a family. Second, external investors seeking a socially responsible firm may consider whether firms have higher institutional ownership or government control.