Nexus between corporate governance and corporate social responsibility in family-owned firms

Abstract

Objective: This study investigates the CG-CSR causal relationship among family-owned firms listed on the PSX.

Research gap: The research gap identified is the lack of empirical investigation into how specific corporate governance determinants (such as CEO duality, audit committee size, insider shareholders, institutional shareholders, board independence and board size) directly affect CSR disclosure in family-owned firms listed on the PSX, particularly those engaged in CSR activities between 2013 and 2022.

Methodology: Data was collected from the annual reports. The heteroskedastic issue is absent in the CG-CSR econometric model, but serial autocorrelation exists; therefore, FGLS regression is run to assess the developed research hypothesis.

The main findings: The findings reveal that board size, CEO duality, and institutional shareholding negatively impact CSR, suggesting that more streamlined boards may enhance CSR initiatives. Conversely, board independence, audit size and insider shareholding positively impact CSR, suggesting that effective corporate governance mechanisms significantly influence CSR disclosure in Pakistan family-owned firms.

Theoretical / Practical Implications of the Findings: Practically, firms should enhance board independence and audit committee size to boost CSR transparency, while limiting CEO duality and institutional shareholding to reduce conflicts. Theoretically, the results support agency theory, highlighting the role of governance in aligning family firm goals with socially responsible practices.

Originality/Value: The originality of the study lies in its focus on examining the direct impact of specific corporate governance factors on CSR disclosure in family-owned firms listed on the PSX, providing insights into governance-CSR dynamics in Pakistan’s unique corporate environment.