Agency problem - a missing link between corporate social responsibility reporting and firm performance

This study investigates the mediating impact of agency problem on the effect of CSR reporting to firm performance.Using the OLS regression method to analyse a dataset of 5,831 firm-year observations of 833 large firms from 30 countries across seven years from 2013 to 2019, the study finds that agency problem is a missing link that mediates the influence of CSR reporting on a firm's economic performance.The results hold in the system GMM estimations.The study unpacks the black box of CSR-firm performance relation in which CSR reporting benefits firm performance through diminishing the agency problem.Unlike the existing literature that only emphasises the role of a corporate board to handle agency problem, this study highlights the role of CSR reporting as an alternative mechanism to mitigate agency problem.Our finding confirms that CSR reporting is fruitful to shareholders; CSR reporting can be employed as a measure to improve principle-agent relationship.