Interfirm spread of corporate social responsibility: the role of overlapping directors

Purpose The paper aims to study the spread of corporate social responsibility (CSR) practices among board-linked firms through their overlapping directors. Design/methodology/approach The empirical analyses are based on a large sample of US firms with detailed director data from BoardEx and CSR data from MSCI ESG STATS. Panel regressions with firm fixed effects are used in the baseline analysis. The authors conduct several robustness checks on alternative variable measures and potential confounding factors. The authors also exploit director deaths with the difference-in-difference methodology to address endogeneity concerns. Findings The authors find that a firm’s CSR performance is positively affected by that of other firms with which it shares directors. The effect holds for both the aggregate CSR performance and subcategories of CSR. Moreover, the spread of CSR is stronger when overlapping directors tend to enhance CSR rather than to decline it and when they hold influential roles at the focal firm or the linked firms. Originality/value This paper provides new evidence on the role of the board in forming a firm’s CSR policies – a corporate governance aspect receiving increasing attention. It also complements the existing literature on board network effects in the contagion of financial and accounting practices. For social implications, this paper’s results suggest that one firm’s CSR behavior is amplified by its board-linked firms through overlapping directors. This amplification should be taken into account when conducting the social cost-benefit analyses on CSR.