Corporate social responsibility and financial performance: Does board diversity matter?

Abstract

In this study, the moderating effect of board diversity on the complex relationship between corporate social responsibility (CSR) performance and financial performance is examined. The resource-based view of the firm and stakeholder theory are used as the theoretical foundation of the study. The hypotheses of the study are tested via fixed-effects regression using data for a sample of 1,234 firms and 5,102 firm-year observations for the period 2009–2013. The study finds evidence that CSR performance and financial performance are positively related, and the magnitude of this relationship is contingent on the level of board diversity. As corporate boardrooms become more diverse across several diversity attributes, the positive effect of CSR performance on financial performance becomes more profound. The study also reveals that race and age diversity constructs have a stand-alone moderating effect on this purported relationship. The study offers significant insights for practitioners regarding the potential role of a diverse board structure in effectively monitoring management actions on CSR concerns.