Does Good Governance make the Companies More Socially Responsible?

Abstract

This paper is intended to examine the ways good governance accelerates company attitudes towards social responsibility. Social Responsibility Expenditure is considered as the proxy of the level of social responsibilities of the companies. Data of eighteen listed banks are selected randomly for five years span ranging from 2012 to 2016 to conduct the study. Descriptive Statistics and Multiple Regression are used as the methods of analysis. The study revealed that the Government shareholding is a variable that positively influences firms’ social behavior. Increased government involvement generates pressures for firms to invest more for the benefit of the society as government is the body trusted by general public. Independent or non‐executive directors act as a monitor and balanced mechanism to control behavior of authority. Research reveals that the firms containing board with more number of independent directors seem more socially responsible. The analysis also reveals that the ownership concentration is negatively associated with CSR practices of firm. It implies that firms where shares are not concentrated in the hand of only a few shareholders rather companies have a large number of shareholders each holding a small fraction of company’s shares, are more accountable to public. Therefore, these firms require additional involvement in community or social development. The study may be useful to the regulatory bodies and organizations to take corporate governance factors into consideration that might influence companies focus on accomplishing their duties for the society.