Affiliation:
1. Department of Accounting, Faculty of Business Yarmouk University Irbid Jordan
2. Department of Accounting and Finance, Kent Business School University of Kent Canterbury UK
Abstract
ABSTRACTResearch Question/IssueThe study examines whether CSR‐focused governance mechanisms (CSR committees, standalone CSR reports, and CSR contracting) operate as complements or substitutes for each other in mitigating CSR decoupling.Research Findings/InsightsThe study finds that CSR‐focused governance mechanisms diminish CSR decoupling and enhance CSR credibility in UK firms. In addition, the simultaneous presence of CSR committees and standalone CSR reports has a complementary effect in mitigating CSR decoupling. Conversely, the combinations of CSR committees and CSR contracting as well as standalone CSR reports and CSR contracting exhibit a substitute relationship. These impacts remain consistent when categorizing CSR decoupling into underreporting and overreporting. During the financial crisis of 2008–2009, the complementary relationship between CSR committees and CSR reports remained consistent, although the substitution between CSR committees and CSR contracting, and CSR reports and CSR contracting, is only observed after the crisis.Theoretical/Academic ImplicationsThe study innovatively contributes to the agency theory literature by adopting a bundle corporate governance approach while focusing on specific CSR governance mechanisms to address agency issues. It empirically shows that complementary combinations of CSR‐focused governance mechanisms signify a marginal benefit in reducing CSR decoupling, leading to a reduction in agency costs.Practitioner/Policy ImplicationsThe study offers several implications. First, it helps firms create ideal combinations of different CSR‐focused governance mechanisms that provide superior marginal benefits. Second, firms' stakeholders, especially the investors, could identify the usefulness of adopting CSR‐focused governance mechanisms in CSR reporting. Finally, it could also attract regulators' attention toward the weaker aspects of the existing corporate governance code regarding CSR.