Impact of Corporate Governance Mechanism on Corporate Social Responsibility Performance in the US Restaurant Companies: The Role of Boards of Directors and Institutional Investors



Journal Title

Journal ISSN

Volume Title



Corporate governance influences corporate decision making, including corporate social responsibility (CSR) related decision making. From the internal corporate governance perspective, a board of directors can play an influential role in making decisions to enhance CSR performance. From the external corporate governance mechanism standpoint, institutional investors are prominent in influencing organizational strategic decisions by exercising substantial voting power. Study 1 aims to investigate the effect of board interlock centrality – the extent to which board members are connected to the board of other firms – on CSR performance. Board interlock centrality identifies the central position of a board member within the network and higher centrality enables a director to obtain valuable information on various issues including CSR from other firms. This study finds that board interlock centrality increases positive CSR performance and the effect is stronger when firms have a greater number of standing board committees. No significant relationship between board interlock centrality and negative CSR performance was found and a moderating effect of board committees on the relationship was insignificant as well.
Study 2 examines the relationship between institutional investors’ ownership and CSR performance. When institutional owners have a large ownership stake in a company, they can exercise their powers and convince managers to make strategic changes. Result of this study shows that higher institutional ownership lowers positive CSR performance and alleviate negative CSR performance. Furthermore, the study found that when a firm has high growth opportunity, the negative link between institutional ownership and positive CSR performance is stronger. Prior research has mainly investigated the relationship between CSR performance and firms’ financial performance leaving the discussion on what effects the CSR performance. This study fills this gap, by building the connection between corporate governance and CSR performance. Specifically, this study investigated boards of directors’ interlock and institutional investors as decision makers and their impact on CSR performance as outcome. The findings of this study indicate that both internal and external corporate governance mechanisms significantly influence CSR performance, but the impact was different for positive CSR performance and negative one. In addition to examining positive and negative CSR performance separately, other merit of this study it that it attempts to improve the understanding of the complex mechanism of board committees that drive CSR practices, as well as the role of firm’s growth opportunities in influencing institutional investors’ CSR decision making.



Corporate social responsibility, Corporate governance, Board of directors, Interlock, Institutional investors, Firm growth opportunities