Do corporate governance and strategy matter in corporate goodness decisions?
Kritish Sharma, S.V.D. Nageswara RaoPurpose
This study aims to examine how governance mechanisms and corporate strategy jointly influence corporate goodness in an emerging market characterized by concentrated ownership and mandatory corporate social responsibility regulations.
Design/methodology/approach
Using a panel of 397 listed firms from an emerging market (India) between 2010 and 2023, this study analyzes the impact of governance mechanisms (ownership, boards and management) and strategic investments on corporate goodness, specifically evaluating the complex interactions among these internal governance structures.
Findings
Advancing the governance-environment, social and governance (ESG) literature on principal-principal conflicts, the authors find promoter-dominated ownership negatively influences corporate goodness. However, strong board and management governance actively drives corporate goodness, interactively offsetting these negative ownership impacts. Furthermore, aligning with compliance-cost perspectives, corporate goodness acts primarily as a regulatory burden without complementary strategic investments.
Practical implications
This study reframes corporate goodness as a strategic resource, dynamically shaped by the interactions among internal governance mechanisms rather than mere regulatory compliance. It demonstrates that the interdependent relationship among ownership, boards and management serves as a vital substitute for weak investor oversight in emerging markets.
Originality/value
This study reframes ESG as a strategic resource shaped by internal governance rather than mere regulatory compliance, demonstrating that governance acts as a vital substitute for weak external enforcement in concentrated-ownership environments.