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J Bus Ethics (2014) 125:601615 DOI 10.1007/s10551-013-1929-2
Corporate Governance and Corporate Social Responsibility
Disclosure: Evidence from the US Banking Sector
Mohammad Issam Jizi Aly Salama
Robert Dixon Rebecca Stratling
Received: 4 February 2013 / Accepted: 14 October 2013 / Published online: 31 October 2013 Springer Science+Business Media Dordrecht 2013
Abstract There is a distinct lack of research into the relationship between corporate governance and corporate social responsibility (CSR) in the banking sector. This paper lls the gap in the literature by examining the impact of corporate governance, with particular reference to the role of board of directors, on the quality of CSR disclosure in US listed banks annual reports after the US sub-prime mortgage crisis. Using a sample of large US commercial banks for the period 20092011 and controlling for audit committee characteristics, board meeting frequency, and banks protability, size and risk, we nd evidence that board independence and board size, the two board characteristics usually associated with the protection of shareholder interests, are positively related to CSR disclosure. This indicates that, with regard to CSR disclosure, more independent boards of directors and larger boards are the internal corporate governance mechanisms which promote both shareholders and other stakeholders interests. Contrary to our expectations, CEO duality also impacts positively on CSR disclosure. From an agency-theoretical viewpoint, this suggests that powerful CEOs may promote transparency about banks CSR activities for their private benets. While this could indicate that powerful CEOs are
under particular pressure to appease stakeholders concerns that they might abuse their power by providing a high degree of CSR disclosure, it could also be a sign of managerial risk aversion or managers private reputational concerns.
Keywords Corporate governance CSR disclosure
US Banks Content analysis Financial crisis
Introduction
Financial institutions, in particular banks, have come under increasing pressure, since the sub-prime mortgage crisis and the following credit crunch to take a more long-term view of their investors business interests and to acknowledge and respond to their obligations to society (Matten 2006; Money and Schepers 2007; Gill 2008; Grove et al. 2011). Due to the extensive negative external effects poorly managed and controlled banks can impose on society, the perception of the rms corporate social responsibility (CSR) activities is important not only for investors and customers risk...