Accounting and society: a holistic perspective on corporate social responsibility

The aim of this thesis is to provide novel and holistic evidence on why managers pursue corporate social responsibility (CSR). To achieve this aim, I conduct three independent but interrelated empirical studies. Motivated by endogeneity concerns and the lack of evidence on managers' private preferences (i.e., agency motives), the first study (Chapter II) examines how a truly exogenous increase in agency problems affects different types of CSR investment decisions. Using a natural experiment for identification, I find that an increase in agency problems causes managers to misinvest in immaterial CSR and overinvest in material CSR. This finding suggests that managers have an underling preference for building a social empire. In addition, I provide evidence that an increase in agency problems causes managers to issue CSR press releases more frequently, and these press releases have a more positive tone. This indicates that managers want the general public to notice their social empire. The findings of the first study contribute to the existing literature by providing more nuanced evidence on managerial preferences, offering improved identification of agency problems, and analyzing CSR press releases. Motivated by the inconclusive evidence on managers'financial motives, the second study (Chapter III) provides more nuanced evidence by accounting for customer profile differences. Using an interaction model, I show that issuing a CSR report has a positive effect on financial performance if firms address end-consumers (i.e., are a B2C firm) and their profitability level is low. In contrast,if firms addresses other businesses (i.e., are a B2B firm) and their profitability level is low, issuing a CSR report has a negative effect on financial performance. This finding contributes to the existing iterature by revealing that only managers of less profitable B2C firms have a financial motive to issue a CSR report. Motivated by the scarcity of research on institutional forces that push or pull managers to pursue CSR, the third study (Chapter IV) examines how culture - an informal institutional force - affects managers' decisions regarding the credibility of CSR reports. Using a multi-methods approach, I show that cultural rule orientation - that is, people's proclivity for adhering to rules, laws, and regulations - has a positive effect on several corporate decisions that determine the credibility of CSR reports (e.g., whether to receive external assurance). Path analysis and qualitative comparative analysis reveal that the direct effect of cultural rule orientation is much stronger than its indirect effect via legal institutions. This finding contributes to the existing literature by showing that culture is a powerful institutional primitive that motivates managers to issue more credible CSR reports.