The fit between corporate social responsibility and corporate governance: the impact on a firm’s financial performance

This study asserts that the relationship between corporate social responsibility (CSR) and a firm’s financial performance needs to be examined with reference to the ‘fit’ between CSR and corporate governance (CG). Therefore, we develop a model to analyze the moderating effects of corporate governance characteristics (board size, ownership concentration, board gender diversity and board independence) on the CSR-firm’s financial performance link (measured by Tobin’s q). The model is tested on a sample of 17,500 observations over an 11-year period and mainly finds support for the moderated hypotheses. The findings indicate that while board size and gender diversity moderate the CSR-firm’s financial performance link positively, CSR interacting with ownership concentration negatively impacts a firm’s financial performance. In addition, we find no support that board independence moderates the CSR-firm’s financial performance link. We advance CSR research by demonstrating the moderating effects of corporate governance characteristics on the CSR-firm’s financial performance link.