Corporate Social Responsibility in Emerging Market Economies - Determinants, Consequences, and Future Research Directions

Corporate Social Responsibility in Emerging Market Economies:
Determinants, Consequences, and Future Research Directions
Narjess Boubakri
Bank of Sharjah Chair in Banking and Finance, American University of Sharjah, UAE
nboubakri@aus.edu
Sadok El Ghoul
Campus Saint-Jean, University of Alberta, Edmonton, AB T6C 4G9, Canada
elghoul@ualberta.ca
Omrane Guedhami
Moore School of Business, University of South Carolina, USA
omrane.guedhami@moore.sc.edu
He (Helen) Wang
John Chambers College of Business and Economics, West Virginia University, USA
helen.wang@mail.wvu.edu
Electronic copy available at: https://ssrn.com/abstract=3718750

Corporate Social Responsibility in Emerging Market Economies:
Determinants, Consequences, and Future Research Directions
Abstract
The last two decades have witnessed a growing interest in corporate social
responsibility (CSR) worldwide by corporations, investors, policy makers, and
researchers across different disciplines. This paper is part of a Special Issue
devoted to CSR practices of firms in emerging market economies (EMEs). It
complements prior research focusing mainly on developed countries. We begin
with an assessment of CSR practices in EMEs, and examine their determinants and
performance implications. We then review key findings in the empirical CSR
literature, including studies published in the Emerging Markets Review Special
Issue. We conclude by describing pertinent avenues for future research.
Keywords: Corporate Social Responsibility; Emerging Markets; Determinants; Valuation;

Cost of Capital
JEL Codes: G32, M14

1. Introduction
Corporate social responsibility (CSR), according to Kitzmueller and Shimshack
(2012, p. 53), refers to “corporate social or environmental behavior that goes beyond the
legal or regulatory requirements.” CSR is characterized as voluntary behavior, as
McWilliams and Siegel (2001, p. 117) allude to in their definition of CSR “as actions that
appear to further some social good, beyond the interests of the firm and that which is
required by law.”
Considered a vital element of corporate strategy, CSR has drawn increasing attention
of scholars from various disciplines.1 Corporations are consistently called upon to alter
their business practices by institutes, investment funds, publications, and online
resources. According to the U.S. Social Investment Forum Foundation’s 2018 Report,2
more than one-quarter of funds under professional management (about 26% of the $46.6
trillion in total assets) in the U.S. are invested in a socially responsible manner. A 2017
KPMG survey3 documents significant growth in global CSR reporting rates (75% in
2017, compared to 64% in 2011 and 18% in 2002), and in the number of firms that
include CSR information in their annual reports (60% in 2017, compared to 56% in
2015).
While the KPMG survey reveals that emerging market economies (EMEs) in Africa
and the Middle East, Eastern Europe, and Latin America generally lag behind North
America and Western Europe, it also highlights that two EMEs—Mexico and Taiwan—
1 According to Christensen, Hail, and Leuz (2019), CSR is the most commonly used term in the
literature. “Sustainability,” “environmental, social, and governance (ESG),” “corporate
philanthropy,” and “corporate social performance (CSP)” have similar meanings.
2 https://www.ussif.org/files/US%20SIF%20Trends%20Report%202018%20Release.pdf
3 https://assets.kpmg/content/dam/kpmg/be/pdf/2017/kpmg-survey-of-corporate-responsibility-
reporting-2017.pdf

experienced the highest growth in CSR reporting for 2015. Furthermore, four countries—
India, Malaysia, South Africa, and Mexico—are among those with the highest levels of
CSR reporting. The success of ESG (environmental, social, and governance) investing
lies in the numbers in emerging economies. Over the last decade, the MSCI Emerging
Markets ESG Leaders Index outperformed the broader MSCI Emerging Markets Index as
of April 30, 2020, by over 3% at an annualized rate.4
Such growth reflects faster regulatory changes, as well as greater market awareness
and evolving pressure from investors, consumers, and regulators in EMEs. Although this
dynamic context should have led to greater research opportunities in the CSR literature,
EMEs have remained an under-researched area (Doh et al., 2019). Most studies to date
have focused on the U.S. or developed countries, primarily because of data availability
(Baskin and Gordon, 2005).
This paper and this Special Issue seek to address this void in the literature for two
main reasons. First, CSR has become a research discipline in its own right. It is
theoretically grounded in either stakeholder theory (e.g., CSR is considered a long-term
investment aimed at maximizing stakeholder value in the long run through enhanced
reputation and competitive advantage), or agency theory (e.g., CSR results from
managers pursuing their own self-interest, leading to over-investment and hence value
destruction from a stakeholder perspective (Friedman, 1970; Habib and Hasan, 2019; Bae
et al., 2019). In accordance with the stakeholder view of CSR, most studies show that it
positively affects firm reputation and performance over time (Friede et al., 2015; Tetrault
Sirsly and Lvina, 2019), creating incentives for managers to continuously invest in CSR.
4 https://www.msci.com/documents/10199/e744e272-e2c7-446b-8839-b62288962177

Second, there are valid reasons why CSR in EMEs should attract more attention. As
mentioned by Tetrault Sisley and Lvina (2019, p.1235), “firms in the developed world
have widely embraced the need to cohabit with the society around them.” Firms choose
to engage in CSR on their own, but also because it is expected by external stakeholders,
the media, and activists, and sometimes due to disclosure regulations (Ali et al., 2017). In
contrast, no such behavior is observed in EMEs. In addition, CSR could help firms in
EMEs overcome institutional voids due to absent or weak market-supporting institutions
(e.g., less developed capital markets, weak regulatory systems, and contract enforcement)
(Khanna and Palepu, 2011; Khanna et al., 2010).
Given their different environments, and their varied formal and informal institutions,
CSR should therefore be “contextualized and locally shaped by multi-level factors and
actors embedded within wider formal and informal governance systems” (Jamali and
Karam, 2018, p. 32). CSR in EMEs “is commonly characterized and less formalized,
more sunken and more philanthropic in nature” (Jamali and Karam, 2018, p. 32). That is
why “it is especially important to investigate CSR in developing countries because of the
pervasive institutional voids that characterize these settings” (Pisani et al., 2017, p. 591).
Consistent with this view, El Ghoul et al. (2017) show that CSR improves a firm’s
competitive advantage in countries with greater institutional voids by reducing
transaction costs and facilitating access to resources.
This paper and this Special Issue aim to answer the calls to study CSR in EMEs by
promoting research on determinants and consequences. To this end, we proceed as
follows. First, we provide a comprehensive analysis of CSR practices in EMEs using
Thomson Reuters’ ASSET4 database, and we compare the CSR performance of firms in

EMEs with those in developed markets. We investigate how CSR in EMEs varies by
country, geographic region, economic development level, and industry, and how it is
influenced by country-level characteristics. We complement this analysis by examining
the determinants and valuation. Second, we survey, in the context of EMEs, a select
number of prior studies on the determinants and consequences of CSR, and update the
CSR literature with the papers published in this Special Issue.
The remainder of the paper is organized as follows. In section 2, we provide
summary statistics and regression analyses on CSR, while section 3 reviews the existing
literature. Section 4 concludes with avenues for future research.
2. CSR in EMEs
To provide a fuller picture, we analyze CSR performance, as well as the determinants
and consequences of CSR in EMEs. Specifically, we: 1) compare CSR performance of
firms in EMEs with that of firms in developed markets; 2) examine CSR by country,
geographic region, economic development, and industry; 3) investigate the impact of
country-level characteristics on CSR in EMEs; 4) conduct regression analyses on the
determinants of CSR; and 5) examine the effects of CSR on firm value and cost of capital
in EMEs.
2.1 A Broad View of CSR in EMEs
We begin by comparing the CSR performance of firms in EMEs with that of firms in
developed markets (see Figures 1 and 2). To construct our performance measures
(Environmental, Social, and CSR), we follow prior studies (e.g., Boubakri et al., 2019;
Cheng et al., 2014; El Ghoul et al., 2016, 2017). We also use the ASSET4 ESG

(Environmental, Social, Governance) database, which has compiled ESG data and scores
for global companies since 2002.5
ASSET4 measures a firm’s Environmental score along three dimensions: emission
reduction (e.g., CO2 emissions), product innovation (eco-design, lifecycle assessment),
and resource reduction (waste recycling, energy use). It measures a firm’s Social score
along seven dimensions: community (e.g., protecting public health), diversity and
opportunity (e.g., percentage of female employees), employment quality (e.g., pension
benefits), health and safety (e.g., injuries and fatalities), human rights (e.g., forced and
child labor), product responsibility (e.g., protecting customer privacy), and training and
development (e.g., employee skills training and career development). Following standard
practice in the literature, our main CSR measure (CSR) is calculated as the average of a
firm’s Environmental and Social scores.
We use MSCI’s market classification to denote countries as either emerging or
developed,6 and we exclude countries with fewer than five firms. Our final sample
consists of 32,709 firm-year observations, representing 3,785 unique firms for the 2002–
2015 period. Our total sample of 43 countries comprises 21 EMEs (Brazil, Chile, China,
Colombia, Egypt, Greece, India, Indonesia, Malaysia, Mexico, Philippines, Poland,
Qatar, Russian Federation, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand,
Turkey, and United Arab Emirates), and 22 developed economies (Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan,
5https://my.refinitiv.com/content/dam/myrefinitiv/products/9753/en/BrochuresandF/ASSET4asset
masterExecutiveFactsheet_a4.pdf
6 https://www.msci.com/market-classification

Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland,
the U.K., and the U.S.).
Figure 1 reports average CSR, Environmental, and Social scores from 2002 to 2015
for emerging and developed markets. All three measures are higher for developed
markets. Note there is no significant difference between the average Environmental
(53.4) or Social (52.8) score for developed markets, but we observe a higher average
Social (51.4) than Environmental (48.0) for EMEs.
Figure 2 shows the overall CSR trend for both markets from 2002 to 2015. We
observe a relatively stable upward trend for developed markets, but a sharp increase of
over 30% in EMEs.7
Table 1 and Figure 3 focus on the trends of CSR, Environmental, and Social in 21
EMEs. Both Environmental and Social increased significantly from 2002 to 2015, almost
60% for the latter, and 14% for the former. Average scores dropped significantly during
the global financial crisis (2008–2009) but grew steadily subsequently. We delve deeper
into CSR in EMEs in the following section.
[Insert Figure 1 here]
[Insert Table 1 here]
7 Table 1 shows the average CSR of EMEs was 40.7 in 2002, and 54.3 in 2015.

2.2 A Closer Look at CSR in EMEs
Tables 2 and 3 and Figures 4 to 6 focus on EMEs, and classify CSR by country,
geographic region, economic development, and industry.8
Panel A of Table 2 presents the CSR, Environmental, and Social scores for each
country. We observe a considerable variation across EMEs: South Africa has the highest
CSR (61.2); Qatar has the lowest (15.0).
Panel B of Table 2 and Figure 4 compare CSR across geographic regions: East Asia
& Pacific, Europe & Central Asia, Latin America & Caribbean, Middle East & North
Africa, South Asia, and Sub-Saharan Africa. Figure 4 clearly shows that Middle East &
North Africa has the lowest CSR (24.0), while Sub-Saharan Africa has the highest (61.2).
In Panel B of Table 2, we examine the CSR of each region using East Asia & Pacific as
the benchmark region.9 Compared to the benchmark, 1) Europe & Central Asia shows no
significant difference in CSR, 2) Middle East & North Africa exhibits significantly lower
CSR, and 3) the other three regions have significantly higher CSR.
Panel C of Table 2 and Figure 5 compare CSR across levels of economic
development: high-income OECD, high-income non-OECD, upper-middle-income, and
lower-middle-income. On average, high-income OECD countries exhibit the best CSR
score (53.3), and high-income non-OECD countries exhibit the lowest (43.1). Middle-
income countries fall in the middle.
8 We use the World Bank’s country classifications to denote EMEs by geographic region and
level of economic development.
9 We use East Asia & Pacific as the benchmark because it accounts for nearly half the EME
sample.

In Figure 6 and Table 3, we compare CSR by industry, using Fama–French (1997)
12-industry groups. Firms in the Chemicals, Energy, and Utilities industries have the
highest CSR; those in Finance, Healthcare, and Wholesale and Retail have the lowest.
2.3 Country-level Characteristics and CSR in EMEs: Univariate Analyses
In this section, we examine the impact of country-level characteristics—including
macroeconomics, political/legal institutions, and national culture—on CSR in EMEs.
Table 4 presents split-sample results of CSR by macroeconomic condition, proxied
by GDP per Capita, Trade Openness, Market Capitalization, and Market Liquidity (all
from World Bank). GDP per Capita is gross domestic product divided by mid-year
population in current U.S. dollars, and measures economic development. Trade Openness
is the sum of exports and imports of goods and services measured as a share of GDP, and
reflects the openness of an economy. Both Market Capitalization and Market Liquidity
measure the development of financial markets. Market Capitalization is share price times
the number of shares outstanding (including their several classes) for listed domestic
companies as a percentage of GDP, and measures the size of the stock market. Market
Liquidity is the total number of traded shares multiplied by their respective matching
prices as a percentage of GDP, and measures the liquidity of the stock market.
10

Table 4 shows that CSR in EMEs is not related to economic development, as there is
no significant difference between countries with high and low GDP per capita. However,
EMEs with open economies and larger and more liquid stock markets tend to have higher
levels of CSR.
Table 5 presents a split-sample analysis of CSR by political and legal institution.
First, we consider the legal protection of investors—Legal Origin and Investor
Protection. Legal Origin, from La Porta et al. (1998), is a dummy variable that equals 1
for a common-law country, and 0 for a civil-law country. La Porta et al. (1998) show that
common‐law countries generally feature stronger legal protection for investors than civil-
law countries. Investor Protection (Revised Antidirector Rights Index), from Djankov et
al. (2008), is an aggregate index of shareholder rights: 1) voting by mail; 2) shares not
deposited; 3) cumulative voting; 4) oppressed minority; 5) pre-emptive rights; and 6)
capital to call a meeting. Table 5 shows that EMEs with stronger legal protection
(common-law and higher investor protection) tend to have higher CSR.
Second, we investigate how political institutions influence CSR in EMEs. We focus
specifically on six political governance measures from the World Governance Indicators
(WGI) dataset: Control of Corruption, Government Effectiveness, Rule of Law,
Regulatory Quality, Political Stability, and Voice and Accountability.10 Control of
Corruption captures “perceptions of the extent to which public power is exercised for
private gain.” Government Effectiveness captures “perceptions of the quality of public
services, the quality of the civil service and the degree of its independence from political
pressures, the quality of policy formulation and implementation, and the credibility of the
10 Detailed descriptions of WGI indicators are found at info.worldbank.org/governance/wgi.
11

government's commitment to such policies.” Rule of Law captures “perceptions of the
extent to which agents have confidence in and abide by the rules of society, and in
particular the quality of contract enforcement, property rights, the police, and the courts,
as well as the likelihood of crime and violence.” Regulatory Quality captures
“perceptions of the ability of the government to formulate and implement sound policies
and regulations that permit and promote private-sector development.” Political Stability
captures “perceptions of the likelihood that the government will be destabilized or
overthrown by unconstitutional or violent means, including politically motivated violence
and terrorism.” Voice and Accountability captures “perceptions of the extent to which a
country's citizens are able to participate in selecting their government, as well as freedom
of expression, freedom of association, and free media.” In addition to these individual
WGI indictors, we construct a composite governance index through principal components
analysis.
The split-sample results in Table 5 suggest that CSR is higher for EMEs with more
stable governments (Political Stability) and more freedom of expression (Voice and
Accountability). Overall, those with better governance tend to have higher CSR. Finally,
we compare CSR of democratic countries with that of non-democratic countries. We find
that democratic EMEs have significantly higher CSR than non-democratic ones.
Third, we examine in Table 6 a split-sample analysis of CSR by national culture. We
employ Hofstede’s (2001) four dimensions of national culture, namely Individualism,
Power Distance, Uncertainty Avoidance, and Masculinity.11 Individualism is the extent
to which people feel independent, as opposed to being interdependent as affiliates of
11 For definition, see http://www.geerthofstede.nl/
12

larger entities. Power Distance is the extent to which the less powerful members of
organizations and institutions (like a family) accept and expect that power is distributed
unequally. Uncertainty Avoidance deals with a society’s tolerance for uncertainty and
ambiguity. Masculinity is the extent to which the use of force is endorsed socially. The
split-sample results in Table 6 suggest that EMEs with higher levels of individualism
(power distance and masculinity) tend to have higher (lower) CSR. The uncertainty
avoidance dimension appears to be unrelated to CSR in EMEs.12
Overall, we find that CSR in EMEs is significantly associated with economic
openness, financial market development, legal and political institutions, and national
culture.
2.4 Determinants of CSR in EMEs
As shown in Figures 1 and 2, we find clear differences between CSR in developed
and emerging economies, which may stem from heterogeneity of firms in both groups.
To address this issue, we next conduct some regression analyses.
In Table 7, we regress CSR on a dummy variable that indicates emerging economy
(Emerging), several firm-level control variables (Firm Size, ROA, Leverage, and R&D),
and industry and year fixed effects. The firm-level control variables come from
Compustat. Firm Size is measured as the logarithm of total assets in millions of $US.
12Griffin et al. (2020) provide a comprehensive assessment of the role of national culture in
explaining cross-country differences in firm-level CSR practices in 49 countries, and identify the
country- and firm-level channels linking national culture, firms’ CSR practices, and firm value.
13

ROA is the ratio of net income before extraordinary items to total assets. Leverage is the
ratio of total debt to total assets. R&D is the ratio of research and development expenses
to total sales. The industry classification follows the Fama–French (1997) 12-industry
classification. The fact that the coefficient of the emerging dummy loads significantly
negatively suggests that average CSR is significantly lower for emerging than developed
economies. Turning to the control variables, Firm Size, ROA, and R&D are positively
associated with CSR. Industries in Consumer Non-durables, Consumer Durables,
Manufacturing, and Chemicals have significantly higher CSR, while Energy, Wholesale
and Retail, and Finance show significantly lower CSR.
In Table 8, we examine the determinants of CSR in EMEs. Our sample consists of
5,767 firm-year observations from 21 EMEs. We regress CSR on variables of economic
development, institutional environment, and financial crisis. In Column (1) of Table 8,
we consider the set of macroeconomic variables used in Table 4: GDP per Capita, Trade
Openness, Market Capitalization, and Market Liquidity. After controlling for firm and
industry variables, only Trade Openness shows a significantly positive impact on CSR.
In Column (2), we include economic development dummies: High-Income Non-
OECD, Upper-Middle-Income, and Lower-Middle-Income. Using high-income OECD
countries as the baseline, we find that high-income non-OECD countries exhibit
significantly lower CSR, while middle-income countries exhibit no significant difference.
In Column (3), we regress CSR on legal protection (Legal Origin) and political
institutional (Composite Governance Index) variables from Table 5. The results show
positive and significant impacts of legal protection and governance on CSR.
14

In Column (4), we examine the effect of financial crises by including a dummy
variable for the years 2008 and 2009. We find that the financial crisis does have a
significantly negative impact on CSR in EMEs.
2.5 Valuation of CSR in EMEs
In this section, we empirically examine the value implications of CSR in EMEs,
specifically how it impacts firm value and the cost of equity capital. We measure firm
value by its market-to-book ratio (MTB), which is calculated as market value divided by
book value. In Column (1) of Table 9, we regress MTB on CSR, the usual firm-level
control variables that are shown to influence firm value, and industry and year fixed
effects. We also include a vector of country-level variables following Table 8: economic
development (GDP per Capita, Trade Openness, Market Capitalization, and Market
Liquidity), institutional environment (Legal Origin and Composite Governance Index),
and national culture (Individualism, Power Distance, Uncertainty Avoidance, and
Masculinity). We exclude observations with missing variables. Our sample consists of
2,882 firm-year observations.
Table 9 reports the results. The coefficient of CSR is positive and significant at the
1% level, suggesting it is associated with higher firm value in EMEs. Economically, a 1-
standard-deviation increase in CSR will result in a 5% increase in firm value in EMEs.13
These findings, based on a sample of EMEs, are consistent with El Ghoul et al. (2017).
They find that CSR is more positively related to valuation in countries with weaker
13 The standard deviation of CSR is 29.108 and the mean of MTB is 1.745.
15

market institutions, which is in line with the important role of CSR in overcoming
institutional voids.
To test the impact of CSR on the cost of equity capital, we follow prior literature
(e.g., Boubakri et al., 2012; Dhaliwal et al., 2006; Hail and Leuz, 2006; El Ghoul et al.,
2011). We estimate the implied cost of equity capital according to four models: Easton
(2004), Ohlson and Juettner-Nauroth (2005), Claus and Thomas (2001), and Gebhardt,
Lee, and Swaminathan (2001).14 We use the average of the four estimates as our main
measure of cost of equity (COE) to overcome the possibility of spurious findings
stemming from one particular model (Dhaliwal et al., 2006). We exclude observations
with missing variables. Our sample consists of 2,924 firm-year observations.
In Column (2) of Table 9, we regress COE on CSR and a vector of firm-level control
variables, a vector of country-level control variables, and industry and year fixed effects.
The coefficient of CSR is negative and significant at the 5% level, suggesting it is related
to reduced equity financing costs in EMEs. Economically, a 1-standard-deviation
increase in CSR will decrease the cost of equity financing by 26 basis points.15 These
findings are consistent with El Ghoul et al. (2011) in a U.S. context, and El Ghoul et al.
(2018), Breuer et al. (2018), and Griffin et al. (2020) in international settings.
Taken together, the results in this section show that CSR is associated with higher
firm value and a lower cost of equity, implying that it is highly valued in emerging
economies.
14 See El Ghoul et al. (2018) for detailed descriptions of the four models.
15 The standard deviation of CSR is 29.233.
16

3. Select Literature Review on CSR in EMEs
In this section, we discuss some select findings in the literature that relate to the
determinants and consequences of CSR.16 Determinants are factors that influence or
determine policies and implementation. Consequences are the results or outcomes of
those policies and their implementation.
3.1 Determinants of CSR in EMEs
CSR determinants fall into two main categories: country-level and firm-level.
Among country-level determinants, formal institutions, such as legal, political, and
economic development, are important antecedents of CSR. Using data from the 105
largest multinational corporations in Brazil, Russia, India, and China, Li et al. (2010)
investigate CSR motives and reveal that a country’s governance environment is the most
important driving force behind CSR communications intensity. Lin et al. (2015)
investigate how political connections influence China-listed companies' CSR. They find
that, when a mayor is replaced, the level of (and propensity for) CSR activity increases.
Marquis and Qian (2014) find that dependency on the government and risk of
governmental monitoring also influence CSR reporting in China.
Robertson (2009) examines CSR in Singapore, Turkey, and Ethiopia, and suggests it
is responsive to institutional differences. Wang et al. (2018) show that corporate
environmental actions exhibit an inverted U-shape as control of environmental practices
shifts from the central government to the most decentralized administrative level. The
authors infer that state hold on corporate environmental actions in China is multifaceted,
16 For more extensive literature reviews on CSR, including on EMEs, please see Mattingly
(2017), Jamali and Karam (2018), and Pisani et al. (2017), among others. Ali et al. (2017) review
empirical research articles related to the specific aspect of CSR disclosure.
17

and subject to “policy-policy decoupling.” Tashman et al. (2019) examine CSR
decoupling of emerging market multinational enterprises and find that such decoupling is
shaped by their dual embeddedness in the home countries and the global institutional
environment.
Liu et al. (2020, in this issue) investigate how turnover of local officials influences
corporate philanthropy. Using a sample of Chinese-listed firms from 2000 to 2015, they
find that Chinese firms tend to increase corporate philanthropy investment when city-
level officials are replaced. This positive impact of official turnovers is stronger for
unexpected turnovers, and for firms with superior performance and/or more state
ownership.
Informal institutions such as religion and culture are also important determinants
of CSR. For example, Beekun and Badawi (2005) suggest that business ethics in Muslim
countries are shaped by Islamic religious beliefs. Similarly, Wang and Juslin (2009) note
that Western CSR concepts do not adapt well to China. They suggest a “Chinese
harmony” approach to CSR as “respecting nature and loving people,” which is inspired
by Confucian interpersonal harmony and Taoist harmony between man and nature.
Kim and Kim’s (2010) survey of Korean public relations practitioners reveals that
social traditionalism values have more explanatory power for CSR attitudes in Korea than
Hofstede’s (2001) cultural dimensions. And Chourou et al. (2020, in this issue) explore
how cross-country differences in empathy can explain variations in CSR. Using firms
from 15 emerging countries over the 2010–2016 period, they show that empathy is
positively associated with CSR. They also use the 2004 Indian Ocean earthquake and
18

tsunami as a quasi-natural experiment, and find that firms located in countries with high
empathy donated more money than those in countries with less empathy.
Khan et al. (2020, in this issue) examine the influence of institutional dynamics on
CSR in Pakistan by conducting 23 in-depth interviews with a variety of stakeholders
(CSR managers, national regulators, and members of CSR-promoting institutions). They
find that, in Pakistan, family traditions and religion, followed by peer pressure, are the
primary drivers of CSR. Labidi et al. (2020, in this issue) investigate the impact of
national culture on socially responsible investment (SRI) fund flows. Using a dataset
from 45 countries over the 1997–2019 period, they find that masculinity and uncertainty
avoidance are negatively associated with SRI fund flows.
Beyond the country-level determinants of CSR, which include formal and informal
institutions, firm-level variables and characteristics also affect CSR in EMEs. Such firm-
level determinants include corporate governance, BOD and CEO characteristics,
ownership structure, internationalization, and so on. For example, Jamali (2008) uses a
qualitative study in a Lebanese context, and investigates the interrelationships between
corporate governance and CSR. He finds that the majority of managers perceive
corporate governance as a necessary pillar of sustainable CSR.
Lindgreen et al. (2009) empirically analyze CSR practices of 84 firms in Botswana
and Malawi and show that boards of directors and investors collectively exert significant
influence on CSR policies and practices. Li et al. (2019) aim to shed light on how CEO
characteristics influence CSR in emerging economies, and document that entrepreneurial
Indian firms with religious owners invest more than other firms in CSR. Wen and Song
(2017) explore the importance of managerial background data for a sample of China-
19

listed firms. They find that managers with work or study experience abroad tend to
promote CSR performance.
Al-Mamun and Seamer (2020, in this issue) add to the scarce literature on directors’
characteristics using a sample of firms from six Asian emerging economies (India,
Indonesia, Malaysia, Pakistan, the Philippines, and Thailand). They show that board of
director attributes (political influence, international experience, business expertise,
interlocking directorships, and independence) positively affect CSR engagement.
We note that, to date, there is solid evidence that firm ownership structure affects
CSR. For example, using data on publicly traded firms in nine East Asian economies, El
Ghoul et al. (2016) find that family-controlled firms exhibit lower CSR performance than
non-family-controlled matching firms. Relatedly, Cao et al. (2019) show that CSR
reporting quality decreases as ownership concentration and control increase in Chinese
publicly listed firms over 2008–2015.
Furthermore, to shed light on another shareholder type—the State—Zhang et al.
(2009) analyze data on Chinese firms’ response to the 2008 Sichuan earthquake. They
find that the amount of charitable giving and the likelihood of firm response for state-
owned enterprises (SOEs) is lower than that for private firms. Following the same
reasoning, Guo et al. (2018) find that Chinese firms with dual status as business group
members and SOEs have weaker CSR performance. They explain that CSR engagement
in this case may be viewed as a strategy for pursuing political legitimacy from the
government, and legitimacy in general from the public.
Cao et al. (2019) examine the role of multiple large shareholders on CSR using a
sample of Chinese-listed firms. They find that controlling shareholders have an
20

entrenchment effect on CSR reporting. This entrenchment effect is mitigated by non-
controlling large shareholders.
The notion of whether and how CSR can be politically motivated is explored further
by Boubakri et al. (2019), who show that, on average, privatized firms exhibit better CSR
performance than other publicly listed firms. They also compare partially (positive state
ownership) and fully (zero state ownership) privatized firms, and find that partial
privatizations exhibit higher CSR intensity than their fully privatized peers. Their results
suggest that, at high levels of residual state ownership, governments’ political motives for
CSR tend to prevail. At lower levels, economic value enhancement and profit-
maximization motives tend to dominate.
Internationalization is another determinant of CSR in EMEs. Based on survey data
from 121 auto parts suppliers in Mexico, Muller and Kolk (2010) find that trade intensity
is an important driver of CSR. Boubakri et al. (2016) find that CSR increases (decreases)
significantly after cross-listing in (delisting from) U.S. markets. Using a sample of 223
Russia-listed companies for the 2012–2015 period, Garanina and Aray (2020, in this
issue) confirm that foreign exposure influences CSR disclosure. They find that foreign
board members and cross-listing are positively related to CSR disclosure.
Wen et al. (2020, in this issue) focus on customer concentration in China. They find
it is negatively associated with CSR performance, especially for firms without foreign
customers or investors, firms without state ownership, and firms in weaker legal
environments.
3.2 Outcomes of CSR in EMEs
21

The literature on the consequences of CSR policies in EMEs is generally more
extensive. The consensus is that CSR has a positive impact on firm financial
performance, but with mitigating factors. Arya and Zhang (2009) explore the market
reaction to CSR initiatives in response to institutional reforms in South Africa. Their
study used publicly listed firms that undertook such initiatives from 1996 to 2005. They
find that CSR announcements were viewed positively by investors during the late phase
of institutional reforms. Cheung et al. (2010) also find a positive impact of CSR on
subsequent-year market valuations in ten Asian emerging markets. They suggest that
firms are rewarded by the market for improving CSR practices.
Wang and Qian (2011) use the melamine contamination incident in China as a
natural experiment. They find that CSR affects institutional investors’ buying and selling
behaviors, and, in turn, stock market returns. Institutional investors’ trading behavior was
largely insensitive to firms’ CSR performance before the incident, but it became
significantly dependent when a certain threshold was exceeded. Wang and Qian (2011)
stress that the positive CSR-performance relationship is more pronounced for firms with
higher public visibility, and for those that are not government-owned.
Choi et al. (2013) find that CSR is negatively associated with earnings management
in Korea. However, the relationship is weaker for chaebol firms and for firms with highly
concentrated ownership, suggesting that CSR practices may be used to cover poor
earnings quality.
Wang and Li (2015) examine market reactions to disclosure of first-time stand-alone
CSR reports in China, and find that CSR initiators are associated with higher market
valuations than matched non-initiators. They find further that CSR initiators controlled by
22

central and local governments exhibit lower market valuations than CSR non-initiators or
CSR initiators controlled by private shareholders. CSR initiators with high CSR reporting
quality and perceived credibility exhibit higher valuations than those with low quality and
medium or low perceived credibility.
In terms of cost of capital, Ye and Zhang (2011) find a U-shaped relation between
CSR and debt financing costs in the context of China. Specifically, they show that
improved CSR reduces debt financing costs as long as there is no CSR over-investment.
The relation is reversed when CSR investment exceeds a certain threshold. Another
positive outcome of CSR is related to trade credit financing. Zhang et al. (2014) argue
that CSR can help firms attract suppliers and consolidate relationships, which in turn
results in more profitable trade credit financing from suppliers.
Saeed and Zamir (2020, in this issue) find that CSR has a negative impact on
dividends, suggesting a substitution effect. They use a hand-collected dataset of listed
firms from China, India, Indonesia, Korea, Malaysia, Pakistan, Turkey, and the Russian
Federation over the 2010–2018 period. This negative effect is more pronounced for firms
with higher institutional ownership.
As EMEs adopt mandatory CSR disclosure policies, some research has focused on
the potential consequences to firms. For example, Chen et al. (2018) study China’s 2008
mandate that firms disclose CSR activities, and show a negative impact on profitability.
This suggests that mandatory CSR disclosure alters firm behavior, generating positive
externalities at the expense of shareholders.
Hickman et al. (2020, in this issue) investigate the impact of mandatory CSR
reporting on the relation between CSR and earnings management using India’s
23

Companies Act of 2013. This Act includes, among other provisions, a unique mandate
that firms must spend a minimum of 2% of reported income on CSR initiatives. In this
context, Hickman et al. (2020) show that firms that voluntarily reported CSR spending
before the Act exhibit more earnings management than other firms. They suggest that
CSR was used manipulatively in the pre-Act period. Once the Act went into effect,
evidence shows firms engaged in less earnings management on average. However,
overall, the results suggest the CSR mandate did not significantly affect earnings
manipulations. Thus, the observed decrease in earnings management in the post-Act
period is likely due to other provisions, such as those related to improving corporate
governance and financial audits.
Within the same context, Aswani et al. (2020, in this issue) examine the value impact
of the Companies Act 2013’s mandate for CSR spending by large and profitable Indian
firms, and find that it is value-decreasing. The value impact is negative, even in firms that
engaged voluntarily in CSR in the past. Profitable firms may benefit from CSR if they
belong to the fast-moving consumer goods sector. However, industrial firms and those
with high capital expenditures tend to be negatively impacted. They conclude that a one-
size-fits-all approach to CSR is suboptimal and value-decreasing.
Recognizing the importance of corporate innovation on firm and economic growth,
Chkir et al. (2020, this issue) examine whether CSR has a material effect on this
outcome. They use a large set of countries that includes EMEs. In particular, they
investigate whether such a relation between CSR and innovation depends on the level of
economic development. Their results show CSR positively affects innovation,
particularly in developed and civil-law countries. The authors suggest that, based on this
24

evidence, governments and firms should emphasize CSR more heavily in order to foster
and reap the benefits of innovation and ensure a comparative advantage in a highly
competitive environment.
4. Conclusion and Avenues for Future Research
To some extent, the review of extant literature on CSR in EMEs shows how little we
know about its determinants and outcomes in this specific setting. The papers published
in this Special Issue are a valuable step forward in addressing this lack of research, but
there is still so much that deserves attention. We consider the following possible research
topics and avenues.
It is certainly opportune to begin with data availability (or unavailability thereof).
Newly available databases such as ASSET4 that span numerous countries tackle this
issue. However, a word of caution is needed regarding the way CSR is defined and
reported across countries, as inconsistencies may affect the results. Using data from a
single country may help circumvent this problem.
Turning to the determinants of CSR, we note there is a great deal to cover. For
example, at a firm level, there remains very little research on how corporate governance
affects CSR in a cross-country setting. A few questions worth exploring are: What are the
roles of ownership concentration and blockholder identity (family, state, etc.)? How are
institutional ownership and its characteristics (e.g., long-term vs. short-term horizons;
independent vs. non-independent; norm-constrained vs. unconstrained) related to CSR?
How do board characteristics of size, independence, and heterogeneity (e.g., in terms of
gender, culture, and education; engagement of directors) affect CSR? What about CEO
characteristics such as tenure, ownership, power, political ideology, culture, and
25

compensation? With greater data collection (even for single countries), we can shed more
light on these questions.
As additional determinants of CSR, more research on macro-level factors is also
warranted. For example, given that CSR is voluntary, how do macroeconomic changes,
such as board reforms or gender reforms, affect and explain CSR adoption, level of
investment, and disclosure? Moreover, although characterized by rapid economic growth,
EMEs still lag in terms of formal institutional development, and they tend to be hindered
by weak political institutions and political uncertainty. This institutional void leaves more
room for informal institutions and culture to overtake them as drivers of corporate
strategy and decisions, including CSR. In an EME context, it is therefore vital to explore
whether informal institutions and culture, as substitutes for weaker formal ones, are more
relevant determinants of CSR.
Ultimately, we need deeper information on which factor (firm-level or country-level)
is the predominant driver of CSR in EMEs. This is a timely issue, given the increasing
importance of EMEs in global economic growth and their contributions to carbon
emissions and global pollution. Currently, we lack sufficient understanding of how CSR
practices in EMEs should be shaped to reduce such adverse effects. For example, if
macro- and country-level determinants of CSR are more important, regulations may help
achieve these goals. On the other hand, if we can identify the types of firms that are most
damaging to the environment (e.g., family), regulations could be designed to change their
behavior. Investors may also opt to penalize these firms. Indeed, as Habib and Hasan
(2019) describe, firms are incentivized to invest in CSR when positive CSR behavior is
used by mutual funds and other institutional investors to screen stocks.
26

With regard to corporate outcomes of CSR in EMEs, several questions remain
unanswered. For example, are socially responsible firms in these weaker institutional
environments more or less likely to manage earnings, avoid taxes, engage in financial
misreporting, and commit fraud? How are these related to CSR disclosure? As we note
above, the literature on the impact of CSR on corporate performance is extensive.
However, we still know little about the potential channels by which it is achieved. Future
work in this direction is warranted (El Ghoul et al., 2017).
Additionally, since firms in EMEs have a long history of exposure to crises (e.g., the
1994 Tequila crisis, the 1997 East Asian financial crisis, Argentina’s long-running
economic woes, the current COVID-19 crisis), we wonder whether the use of CSR could
mitigate the adverse effects of such extreme and disruptive events? In other words, does
CSR in EME firms have particular value during crisis periods? More methodological
studies are needed that can exploit advanced empirical methodologies, such as regression
discontinuity design, difference-in-differences, and instrumental variables.
To conclude, and as discussed above, research on the determinants and consequences
of CSR in EMEs remains scant. This Special Issue aims to fill that gap by contributing
ten novel studies to the literature, and by proposing several avenues for future research.
27

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33

Figure 1. CSR Performance: Emerging vs. Developed Economies
Notes: This figure reports average CSR, Environmental, and Social scores from 2002 to 2015 for
emerging and developed economies.
34

Figure 2. CSR Trend: Emerging vs. Developed Economies
Notes: This figure exhibits the overall CSR trends from 2002 to 2015 for emerging and developed
economies.
35

Figure 3. CSR Trend in EMEs
65
60
55
50
45
40
35
30
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
CSR Environmental Social
Notes: This figure shows the trends of CSR, Environmental, and Social scores from 2002 to 2015
in EMEs.
36

Figure 4. CSR in EMEs: By Geographic Region
Notes: This figure compares the CSR, Environmental, and Social scores in EMEs by geographic
regions.
37

Figure 5. CSR in EMEs: By Economic Development
Notes: This figure compares the CSR, Environmental, and Social scores in EMEs by economic
development.
38

Figure 6. CSR in EMEs: By Industry
Notes: This figure compares the CSR, Environmental, and Social scores in EMEs by industry,
using Fama–French (1997) 12-industry groups.
39

Table 1. CSR Trend in EMEs
Year N CSR Environmental Social
2002 16 40.7 46.7 34.7
2003 16 47.8 46.3 49.4
2004 21 56.7 59.3 54.1
2005 24 53.2 55.1 51.2
2006 25 52.9 54.0 51.7
2007 65 59.7 57.4 62.1
2008 227 49.4 46.9 51.8
2009 336 47.7 44.7 50.7
2010 696 47.3 45.7 49.0
2011 776 47.1 45.4 48.9
2012 859 49.5 47.4 51.6
2013 900 49.8 47.9 51.7
2014 958 49.7 48.4 51.0
2015 848 54.3 53.1 55.4
Notes: This table shows the trends of CSR, Environmental, and Social scores from 2002 to 2015 in
EMEs.
40

Table 2. CSR in EMEs
N CSR Environmental Social

Emerging Economies Total 5,767 49.7 48.0 51.4
Panel A by Economy
N CSR Environmental Social Geographic Region Economic Development
Brazil 392 56.1 51.3 61.0 Latin America & Caribbean Upper-middle-income
Chile 150 45.5 44.0 47.1 Latin America & Caribbean High income: OECD
China 508 33.1 33.9 32.4 East Asia & Pacific Upper-middle income
Colombia 60 48.9 42.4 55.4 Latin America & Caribbean Upper-middle income
Egypt 66 23.2 20.1 26.3 Middle East & North Africa Lower-middle income
Greece 218 51.4 50.5 52.3 Europe & Central Asia High income: OECD
India 550 55.8 54.6 57.0 South Asia Lower-middle income
Indonesia 201 52.7 45.2 60.3 East Asia & Pacific Lower-middle income
Malaysia 303 45.5 40.1 50.8 East Asia & Pacific Upper-middle income
Mexico 188 50.6 49.2 52.1 Latin America & Caribbean Upper-middle income
Philippines 128 41.5 39.6 43.4 East Asia & Pacific Lower-middle income
Poland 173 37.3 34.8 39.7 Europe & Central Asia High income: OECD
Qatar 37 15.0 14.3 15.8 Middle East & North Africa High income: Non-OECD
Russian Federation 255 49.3 46.1 52.4 Europe & Central Asia High income: Non-OECD
Saudi Arabia 57 29.3 32.3 26.3 Middle East & North Africa High income: Non-OECD
South Africa 643 61.2 53.3 69.1 Sub-Saharan Africa Upper-middle income
South Korea 678 59.6 61.7 57.6 East Asia & Pacific High income: OECD
Taiwan 776 44.1 47.9 40.4 East Asia & Pacific High income: Non-OECD
Thailand 180 56.6 51.7 61.5 East Asia & Pacific Upper-middle income
Turkey 168 54.8 53.3 56.2 Europe & Central Asia Upper-middle income
United Arab Emirates 36 26.3 28.8 23.8 Middle East & North Africa High income: Non-OECD
41

Table 2. Continued
Panel B by Geographic Region
East Asia & Pacific 2,774 47.4 47.5 47.2
Europe & Central Asia 814 48.4 46.4 50.5
Latin America & Caribbean 790 52.3 48.7 55.8
Middle East & North Africa 196 24.0 24.2 23.8
South Asia 550 55.8 54.6 57.0
Sub-Saharan Africa 643 61.2 53.3 69.1
CSR Difference (t-statistics)
Europe & Central Asia vs. East Asia & Pacific 1.1 (0.9)
Latin America & Caribbean vs. East Asia & Pacific 4.9*** (4.0)
Middle East & North Africa vs. East Asia & Pacific -23.4*** (-10.7)
South Asia vs. East Asia & Pacific 8.4*** (6.1)
Sub-Saharan Africa vs. East Asia & Pacific 13.8*** (10.9)
Panel C by Economic Development
High-income OECD 1,219 53.3 53.7 52.8
High-income Non-OECD 1,161 43.1 45.1 41.1
Upper-middle-income 2,442 50.7 46.6 54.8
Lower-middle-income 945 50.9 48.2 53.7
CSR Difference (t-statistics)
High-income Non-OECD vs. High-income OECD -10.2*** (-8.0)
Upper-middle-income vs. High-income OECD -2.6*** (-2.5)
Lower-middle-income vs. High-income OECD -2.3* (-1.8)
Notes: This table presents the CSR scores in EMEs by country, geographic region, and economic development. Panel A presents the CSR scores for
each emerging economy. Panel B shows the CSR scores across geographic regions and examine the CSR of each region using East Asia & Pacific
as the benchmark. Panel C compares the CSR scores by economic development using high-income OECD countries as the benchmark.
42

Table 3. CSR in EMEs: By Industry
Industry N CSR Environmental Social
Business Equipment 499 56.6 58.4 54.8
Chemicals 280 60.4 62.6 58.2
Consumer Durables 162 54.8 58.9 50.7
Consumer Non-durables 343 48.6 46.2 51.1
Energy 369 64.7 62.2 67.2
Finance 1336 40.7 38.1 43.3
Healthcare 147 34.4 30.3 38.5
Manufacturing 631 54.2 55.6 52.9
Telecommunication 368 49.4 43.2 55.7
Utilities 342 57.5 53.9 61.0
Wholesale and Retail 343 40.4 36.5 44.2
Others 947 49.5 47.2 51.8
Notes: This table shows the CSR, Environmental, and Social scores in EMEs by industry, using
Fama–French (1997) 12-industry groups.
43

Table 4. CSR in EMEs: Split Sample by Macroeconomics
Difference
N CSR
(t-statistics)
GDP per Capita High 2,501 50.6 0.1
Low 2,490 50.5 (0.1)
Trade Openness High 2,433 51.6 2.5***
Low 2,417 49.1 (3.0)
Market Capitalization High 2,471 54.9 8.3***
Low 2,468 46.5 (10.2)
Market Liquidity High 2,515 52.6 4.0***
Low 2,476 48.6 (4.9)
Notes: This table presents a split-sample analysis of CSR in EMEs by macroeconomic conditions.
GDP per Capita is gross domestic product divided by mid-year population in current U.S. dollars.
Trade Openness is the sum of exports and imports of goods and services measured as a share of
GDP. Market Capitalization is share price times the number of shares outstanding (including their
several classes) for listed domestic companies as a percentage of GDP. Market Liquidity is the total
number of traded shares multiplied by their respective matching prices as a percentage of GDP. t-
statistics are reported in parentheses. The superscript asterisks ∗∗∗, ∗∗, and ∗ denote statistical
significance at the 1%, 5%, and 10% levels, respectively.
44

Table 5. CSR in EMEs: Split Sample by Political/Legal Institutions
Difference
N CSR
(t-statistics)
Legal Origin Common 1,769 54.6 7.0***
Civil 3,998 47.6 (8.4)
Investor Protection High 2,566 57.0 12.3***
(Revised Anti-director Rights Index) Low 3,071 44.7 (16.0)
Control of Corruption (WGI) High 2,834 49.9 0.3
Low 2,933 49.6 (0.4)
Government Effectiveness (WGI) High 2,819 49.8 0.1
Low 2,948 49.7 (0.2)
Rule of Law (WGI) High 3,005 50.1 0.7
Low 2,762 49.4 (0.9)
Regulatory Quality (WGI) High 2,782 49.7 -0.1
Low 2,985 49.8 (-0.1)
Political Stability (WGI) High 2,782 50.4 2.4***
Low 2,457 48.0 (2.9)
Voice and Accountability (WGI) High 2,820 52.8 6.1***
Low 2,947 46.8 (7.9)
Composite Governance Index (WGI) High 2,881 50.5 1.4*
Low 2,886 49.0 (1.8)
Democracy Yes 4,280 52.8 11.8***
No 1,487 41.0 (13.6)
Notes: This table presents a split-sample analysis of CSR in EMEs by political and legal institutions.
Legal Origin is a dummy variable that equals 1 for a common-law country, and 0 for a civil-law
country from La Porta et al. (1998). Investor Protection (Revised Antidirector Rights Index) is an
aggregate index of shareholder rights from Djankov et al. (2008).Control of Corruption,
Government Effectiveness, Rule of Law, Regulatory Quality, Political Stability, and Voice and
Accountability are six political governance measures from the World Governance Indicators (WGI)
dataset. Composite Governance Index (WGI) is a composite governance index through principal
components analysis. Democracy is a dummy variable that indicates democratic countries. t-
statistics are reported in parentheses. The superscript asterisks ∗∗∗, ∗∗, and ∗ denote statistical
45

Table 6. CSR in EMEs: Split Sample by National Culture
Difference
N CSR
(t-statistics)
Individualism High 2,715 53.9 6.3***
Low 2,856 47.6 (8.1)
Power Distance High 2,758 47.4 -6.5***
Low 2,813 53.8 (-8.3)
Uncertainty Avoidance High 3,058 50.8 0.4
Low 2,513 50.4 (0.5)
Masculinity High 2,771 49.1 -3.1***
Low 2,800 52.2 (-3.9)
Notes: This table presents a split-sample analysis of CSR in EMEs by national culture.
Individualism, Power Distance, Uncertainty Avoidance, and Masculinity are four dimensions of
national culture from Hofstede (2001). Individualism is the extent to which people feel independent,
as opposed to being interdependent as members of larger wholes. Power Distance is the extent to
which the less powerful members of organizations and institutions (like a family) accept and expect
that power is distributed unequally. Uncertainty Avoidance deals with a society’s tolerance for
uncertainty and ambiguity. Masculinity is the extent to which the use of force is endorsed socially.
t-statistics are reported in parentheses. The superscript asterisks ∗∗∗, ∗∗, and ∗ denote statistical
46

Table 7. CSR in EMEs: Emerging vs. Developed
(1)
Emerging -5.241***
(-5.285)
Firm Size 9.470***
(48.371)
ROA 21.530***
(5.850)
Leverage 1.705
(0.675)
R&D 46.977***
(4.559)
Industry1 (Consumer Non-Durables) 4.180**
(2.387)
Industry2 (Consumer Durables) 5.599**
(2.355)
Industry3 (Manufacturing) 11.015***
(7.979)
Industry4 (Energy) -3.622**
(-2.117)
Industry5 (Chemicals) 17.620***
(9.978)
Industry6 (Business Equipment) -0.816
(-0.442)
Industry7 (Telecommunication) -2.386
(-1.063)
Industry8 (Utilities) 0.515
(0.278)
Industry9 (Wholesale and Retail) -3.265**
(-1.977)
Industry10 (Healthcare) -3.604
(-1.579)
Industry11 (Finance) -23.333***
(-16.861)
Constant -36.926***
(-18.611)
Year Fixed Effects Yes
Observations 31,550
Adjusted R-squared 0.323
Note: This table presents regression results of CSR on the emerging economy indicator (Emerging),
firm-level control variables, industry and year fixed effects. Firm Size is measured as the logarithm
of total assets in millions of $US. ROA is the ratio of net income before extraordinary items to total
assets. Leverage is the ratio of total debt to total assets. R&D is the ratio of research and
development expenses to total sales. The industry classification follows the Fama–French (1997)
47

12-industry classification. t-statistics are reported in parentheses. The superscript asterisks ∗∗∗, ∗∗,
and ∗ denote statistical significance at the 1%, 5%, and 10% levels, respectively.
48

Table 8. CSR in EMEs: Economic Development, Institutional Environment, and
Crisis
(1) (2) (3) (4)
Log (GDP per Capita) -5.276
(-0.884)
Trade Openness 0.139*
(1.857)
Market Capitalization -0.033
(-1.351)
Market Liquidity 0.005
(0.642)
High-Income Non-OECD -14.007***
(-5.009)
Lower-Middle-Income -0.766
(-0.285)
Upper-Middle-Income 0.269
(0.110)
Legal Origin 13.534***
(7.769)
Composite Governance Index (WGI) 1.314***
(3.451)
Crisis -5.830***
(-5.511)
Firm Size 10.369*** 6.761*** 7.639*** 10.053***
(18.481) (12.307) (14.086) (18.672)
ROA 47.093*** 31.087*** 31.147*** 26.078***
(4.552) (2.882) (2.929) (2.784)
Leverage -2.626 1.439 3.485 -2.870
(-0.509) (0.259) (0.638) (-0.576)
R&D -30.000 -58.839* -50.861* -15.397
(-0.723) (-1.959) (-1.872) (-0.498)
Industry1 (Consumer Non-Durables) 1.854 1.767 2.187 2.194
(0.454) (0.435) (0.534) (0.570)
Industry2 (Consumer Durables) 11.090*** 4.089 3.062 6.205
(2.628) (0.721) (0.554) (1.511)
Industry3 (Manufacturing) 10.368*** 6.016* 5.077 7.015**
(3.529) (1.768) (1.561) (2.503)
Industry4 (Energy) 11.424*** 11.373*** 10.884*** 10.317***
(3.627) (3.136) (3.103) (3.362)
Industry5 (Chemicals) 18.563*** 13.718*** 10.614** 14.830***
(4.200) (3.078) (2.125) (3.267)
Industry6 (Business Equipment) 9.535* 20.649*** 12.764*** 17.223***
(1.779) (5.043) (3.461) (4.370)
49

Industry7 (Telecommunication) -3.609 -1.268 -3.801 -1.757
(-0.985) (-0.312) (-0.942) (-0.481)
Industry8 (Utilities) 5.310 3.927 3.936 4.741
(1.559) (1.046) (0.994) (1.427)
Industry9 (Wholesale and Retail) -9.854*** -6.467 -7.573** -9.768***
(-2.763) (-1.604) (-1.975) (-2.810)
Industry10 (Healthcare) -7.758** -8.976* -9.660** -7.913**
(-2.074) (-1.858) (-2.227) (-2.144)
Industry11 (Finance) -22.606*** -17.980*** -20.110*** -23.291***
(-9.017) (-6.632) (-7.652) (-9.698)
Constant -40.118 -17.720** -22.423*** -61.508***
(-0.559) (-2.427) (-3.090) (-10.691)
Country Fixed Effects Yes No No Yes
Year Fixed Effects Yes Yes Yes No
Observations 4,691 5,656 5,656 5,656
Adjusted R-squared 0.386 0.194 0.206 0.351
Note: This table presents regression results of determinants of CSR in EMEs. GDP per Capita is
gross domestic product divided by mid-year population in current U.S. dollars. Trade Openness is
the sum of exports and imports of goods and services measured as a share of GDP. Market
Capitalization is share price times the number of shares outstanding (including their several
classes) for listed domestic companies as a percentage of GDP. Market Liquidity is the total number
of traded shares multiplied by their respective matching prices as a percentage of GDP. High-
Income Non-OECD, Upper-Middle-Income, and Lower-Middle-Income are dummy variables of
economic development. Legal Origin is a dummy variable that equals 1 for a common-law country,
and 0 for a civil-law country from La Porta et al. (1998). Composite Governance Index (WGI) is a
composite governance index through principal components analysis. Crisis is a dummy variable
that indicates the years 2008 and 2009 during the financial crisis. Firm Size is measured as the
logarithm of total assets in millions of $US. ROA is the ratio of net income before extraordinary
items to total assets. Leverage is the ratio of total debt to total assets. R&D is the ratio of research
and development expenses to total sales. The industry classification follows the Fama–French
(1997) 12-industry classification. t-statistics are reported in parentheses. The superscript asterisks
∗∗∗, ∗∗, and ∗ denote statistical significance at the 1%, 5%, and 10% levels, respectively.
50

Table 9. Valuation of CSR in EMEs
MTB COE (×100)
(1) (2)
CSR 0.003*** -0.009**
(2.737) (-2.491)
Firm Size -0.283*** 0.592***
(-9.380) (6.231)
ROA 8.646*** -4.703**
(12.398) (-2.168)
Leverage -0.076 0.456
(-0.411) (0.602)
R&D 3.182* -3.045
(1.687) (-0.796)
Sales Growth 0.040
(0.530)
Cash 0.599*
(1.689)
Long-Term Growth 0.029***
(3.092)
Dispersion 4.076***
(8.640)
Log (GDP per Capita) -0.484*** 4.135***
(-4.079) (10.717)
Trade Openness -0.004** -0.013*
(-2.112) (-1.754)
Market Capitalization -0.001* -0.009***
(-1.648) (-2.762)
Market Liquidity 0.001** 0.005*
(2.438) (1.784)
Legal Origin 0.663*** -1.381**
(4.152) (-2.240)
Composite Governance Index (WGI) 0.052** -0.844***
(2.172) (-9.451)
Individualism -0.009*** 0.133***
(-2.710) (7.709)
Power Distance 0.010*** -0.031***
(3.044) (-2.647)
Uncertainty Avoidance 0.010*** -0.057***
(3.085) (-4.720)
Masculinity -0.006 -0.082***
(-1.527) (-5.459)
Industry1 (Consumer Non-Durables) 0.315** -2.482***
51

(2.099) (-7.300)
Industry2 (Consumer Durables) -0.321*** -1.078***
(-2.920) (-2.899)
Industry3 (Manufacturing) -0.077 -0.205
(-1.046) (-0.556)
Industry4 (Energy) -0.308*** 0.390
(-3.358) (0.822)
Industry5 (Chemicals) 0.313* -1.788***
(1.802) (-4.379)
Industry6 (Business Equipment) 0.210 -2.286***
(1.152) (-5.220)
Industry7 (Telecommunication) 0.246** -2.023***
(2.006) (-4.843)
Industry8 (Utilities) -0.193** 0.349
(-2.293) (0.616)
Industry9 (Wholesale and Retail) 0.344*** -2.862***
(2.725) (-8.723)
Industry10 (Healthcare) 0.267 -3.451***
(1.097) (-10.200)
Industry11 (Finance) 0.348* -1.699***
(1.962) (-4.844)
Constant 7.178*** -29.009***
(6.446) (-7.538)
Year Fixed Effects Yes Yes
Observations 2,882 2,924
Adjusted R-squared 0.605 0.294
Note: This table presents regression results of valuation of CSR in EMEs. MTB, the market-to-book
ratio, is calculated as market value divided by book value. COE, the implied cost of equity capital,
is estimated according to four models: Easton (2004), Ohlson and Juettner-Nauroth (2005), Claus
and Thomas (2001), and Gebhardt, Lee, and Swaminathan (2001). Firm Size is measured as the
logarithm of total assets in millions of $US. ROA is the ratio of net income before extraordinary
items to total assets. Leverage is the ratio of total debt to total assets. R&D is the ratio of research
and development expenses to total sales. Sales Growth is the difference of sales in year t and t-1
divided by sales in year t-1. Cash is cash divided by net assets. Long-term Growth Rate is forecasted
long-term earnings growth. Dispersion is dispersion of analyst forecasts defined as the coefficient
of variation of one-year-ahead analyst forecasts of earnings per share in June of year t. GDP per
Capita is gross domestic product divided by mid-year population in current U.S. dollars. Trade
Openness is the sum of exports and imports of goods and services measured as a share of GDP.
Market Capitalization is share price times the number of shares outstanding (including their several
classes) for listed domestic companies as a percentage of GDP. Market Liquidity is the total number
of traded shares multiplied by their respective matching prices as a percentage of GDP. High-
Income Non-OECD, Upper-Middle-Income, and Lower-Middle-Income are dummy variables of
economic development. Legal Origin is a dummy variable that equals 1 for a common-law country,
and 0 for a civil-law country from La Porta et al. (1998). Composite Governance Index (WGI) is a
composite governance index through principal components analysis. Crisis is a dummy variable
that indicates the years 2008 and 2009 during the financial crisis. The industry classification follows
52

the Fama–French (1997) 12-industry classification. t-statistics are reported in parentheses. The
superscript asterisks ∗∗∗, ∗∗, and ∗ denote statistical significance at the 1%, 5%, and 10% levels,
respectively.
53

Corporate Social Responsibility in Emerging Market Economies - Determinants, Consequences, and Future Research Directions

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Corporate Social Responsibility in Emerging Market Economies - Determinants, Consequences, and Future Research Directions

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Corporate Social Responsibility in Emerging Market Economies:

Determinants, Consequences, and Future Research Directions

Electronic copy available at: https://ssrn.com/abstract=3718750

Determinants, Consequences, and Future Research Directions

Keywords: Corporate Social Responsibility; Emerging Markets; Determinants; Valuation;

Electronic copy available at: https://ssrn.com/abstract=3718750

Corporate social responsibility (CSR), according to Kitzmueller and Shimshack

legal or regulatory requirements.” CSR is characterized as voluntary behavior, as

their business practices by institutes, investment funds, publications, and online

Electronic copy available at: https://ssrn.com/abstract=3718750

of April 30, 2020, by over 3% at an annualized rate.4

(Baskin and Gordon, 2005).

theoretically grounded in either stakeholder theory (e.g., CSR is considered a long-term

Electronic copy available at: https://ssrn.com/abstract=3718750

EMEs overcome institutional voids due to absent or weak market-supporting institutions

(Khanna and Palepu, 2011; Khanna et al., 2010).

competitive advantage in countries with greater institutional voids by reducing

transaction costs and facilitating access to resources.

promoting research on determinants and consequences. To this end, we proceed as

follows. First, we provide a comprehensive analysis of CSR practices in EMEs using

Electronic copy available at: https://ssrn.com/abstract=3718750

influenced by country-level characteristics. We complement this analysis by examining

CSR literature with the papers published in this Special Issue.

The remainder of the paper is organized as follows. In section 2, we provide

literature. Section 4 concludes with avenues for future research.

To provide a fuller picture, we analyze CSR performance, as well as the determinants

and consequences of CSR in EMEs. Specifically, we: 1) compare CSR performance of

geographic region, economic development, and industry; 3) investigate the impact of

country-level characteristics on CSR in EMEs; 4) conduct regression analyses on the

2.1 A Broad View of CSR in EMEs

Electronic copy available at: https://ssrn.com/abstract=3718750

for global companies since 2002.5

ASSET4 measures a firm’s Environmental score along three dimensions: emission

reduction (e.g., CO2 emissions), product innovation (eco-design, lifecycle assessment),

opportunity (e.g., percentage of female employees), employment quality (e.g., pension

firm’s Environmental and Social scores.

We use MSCI’s market classification to denote countries as either emerging or

Colombia, Egypt, Greece, India, Indonesia, Malaysia, Mexico, Philippines, Poland,

Electronic copy available at: https://ssrn.com/abstract=3718750

the U.K., and the U.S.).

markets. Note there is no significant difference between the average Environmental

Social (51.4) than Environmental (48.0) for EMEs.

over 30% in EMEs.7

into CSR in EMEs in the following section.

[Insert Figure 1 here]

[Insert Figure 2 here]

[Insert Figure 3 here]

[Insert Table 1 here]

Electronic copy available at: https://ssrn.com/abstract=3718750

geographic region, economic development, and industry.8

CSR (61.2); Qatar has the lowest (15.0).

Panel C of Table 2 and Figure 5 compare CSR across levels of economic

development: high-income OECD, high-income non-OECD, upper-middle-income, and

lower-middle-income. On average, high-income OECD countries exhibit the best CSR

income countries fall in the middle.

Electronic copy available at: https://ssrn.com/abstract=3718750

[Insert Table 2 here]

[Insert Figure 4 here]

[Insert Figure 5 here]

[Insert Figure 6 here]

[Insert Table 3 here]

2.3 Country-level Characteristics and CSR in EMEs: Univariate Analyses