Financial slack and corporate social performance of Asian multinational corporations: An institutional difference hypothesis perspective

Abstract The institutional difference hypothesis (IDH) posits that the stark contrasts between developed and developing economies lead to a conflicting relationship between financial slack and corporate social performance (CSP). Nonetheless, prior IDH examinations largely disregard the unique institutional aspects of different regions. In this study, we advance IDH by capturing variations within Asian economies while preserving the unique Asian context. Drawing on institutional theory, we conceptualize the deployment of financial slack for CSP as an organizational response in a specific institutional context. In the Asian context, we propose that the relationship between financial slack and CSP is conditioned on whether the Asian firms are geographically diversified to host countries with better institutional quality than the one at home (positive distance), and on the presence of state or family blockholders in their ownership configuration. We tested our predictions using a sample of 1,044 multinational corporations (MNCs) from 10 Asian economies. Implications for the further development of IDH and relevant policies are discussed.