Does Local Culture Affect CSR Transparency? The Effect of Corruption Culture on CSR Decoupling

Abstract

Synopsis The research problem This study examines the association between corruption culture and corporate social responsibility (CSR) decoupling. Motivation Only a handful of studies have examined the effect of local culture on organizational outcomes. Recent studies shed light on the factors contributing to CSR decoupling, highlighting the value of understanding this disparity; however, few studies have documented the role of societal factors that contribute to this gap. Our study seeks to fill this gap by documenting that corruption culture increases dishonest behavior, reduces social stigma and the likelihood of punishment, promotes managerial rent-seeking, and ultimately affects CSR decoupling. The hypothesis Corruption culture is associated with higher CSR decoupling. Target population We used a sample of Chinese A-listed firms from 2010 to 2020. Adopted methodology We used ordinary least squares, path analysis, two-stage least square (2SLS) regression, generalized method of moment (GMM), and multiperiod difference in difference. Analyses By using 5,428 firm–year observations, this study examined the association between corruption culture and CSR decoupling. We employed robustness and mechanism tests to corroborate the findings and proposed mechanisms. Finally, we conducted heterogeneity tests to assess the varied impact of corporate governance, state ownership, and CEO attributes on the relationship between corruption culture and CSR decoupling. Findings We documented a positive relationship between corruption culture and CSR decoupling. We also found a less pronounced effect of corruption on CSR decoupling among firms with extensive media coverage and investments from qualified foreign institutional investors. Furthermore, the effect of corruption on CSR decoupling was particularly pronounced for private firms. We also observed that the effect of a corruption culture was especially weak for firms with chief executive officers who have international experience, are nonpolitically connected, and are female.