Corporate Social Responsibility Decoupling in
Family Firms, and the Moderating Role of Financial
Analysts
Krista van Zijl
S2735377
MScBA Management Accounting & Control
Abstract
Previous research has delved into the notion of Corporate Social Responsibility (CSR), and more recently into CSR decoupling. CSR decoupling occurs when the policies and actions regarding the CSR of a firm do not match. Ambiguity exists in prior research regarding family-ownership and CSR, specifically whether family-owned firms are more or less responsible than nonfamily-owned firms. Much research in the family business literature utilizes the socioemotional wealth (SEW) theory, which entails adding non-financial aspects into decision-making, instead of only financial aspects. This study aims to contribute to the family business literature and the SEW theory, and attempts to reduce the ambiguity regarding the CSR of family firms. Furthermore, the knowledge on the effect of financial analysts on CSR decoupling is researched, as this effect has not been researched yet. This paper analyses the relationship between CSR decoupling and family-ownership. Furthermore, a moderating relationship of the presence of financial analysts on the aforementioned relationship is analysed. Panel regression analysis is conducted, with a sample consisting of 8,023 unique firms in 68 different countries and 73 different industry sectors, during a time period from 2002-2017. No support for the first hypothesis was found, showing that the negative relationship between family ownership and CSR decoupling is insignificant. The second hypothesis was backed by statistical analysis, demonstrating that the presence of financial analysts has a negative effect on the relationship between family ownership and CSR decoupling.
Supervisor: Nazim Hussain
Word Count: 9,671
Introduction
The use of corporate social responsibility (CSR) in companies has been a subject in research for many decades. Due to intensified external influences on organisations and growing institutional pressures for more social and environmental causes, the interest in CSR has heightened over the past years (Bromley & Powell, 2012; Hawn & Ioannou, 2016). This heightened interest puts more pressures and expectations on corporations to engage in CSR, resulting in an increasing amount of companies engaging in several types of CSR policies (Jamali, 2010). Examples of these CSR policies are ISO certificates, codes of conducts, various types of cooperation with stakeholder initiatives and memberships in global initiatives like the UN Global Compact (Graafland & Smid, 2019).
Research shows that family firms can be seen as more ethical than nonfamily firms, and perform better in CSR-related matters. This is displayed in several studies, where family firms perform in a more socially or environmentally responsible manner (Dyer Jr. & Whetten, 2006; Kim, Fairclough & Dibrell, 2016; Nekhili, Nagati, Chtioui & Rebolledo, 2017). Nevertheless, other studies report results where family firms are not more responsible than nonfamily firms, are only more responsible in a few areas, or are even less responsible than nonfamily firms (Cruz, Larazza-Kintana, Garcés-Galdeano & Berrone, 2014; Hirigoyen & Poulain-Rehm, 2014). This ambiguity lingers in the family business literature and literature on CSR.
A concept which can add to this ambiguity is CSR decoupling. For all firms, family- or nonfamily-owned, there is a possibility to not perform responsible policies as they were originally intended. This is seen as a mismatch between the policies and actions of a firm. This process can be described as decoupling. Decoupling is a symbolic structure, where for example a program is formally adopted in order to conform with the expectations from outside, while simultaneously, the day-to-day operations of a firm are not affected by the adopted program (Behnam & Maclean, 2011). The symbolic part here is that, with regard to external stakeholders, legitimacy is achieved by giving the appearance that regulatory requirements are satisfied. However, it does not have an impact on the firm’s activities, and ‘business as usual’ can still be conducted (Behnam & Maclean, 2011; Maclean & Behnam, 2010). In the area of CSR, this can mean that companies either don’t implement the CSR policies they have designed, or that the implementation of the policies does not have the expected impact (Graafland & Smid, 2019). A more general approach to the symbolic strategy is that firms overstate or understate their CSR performance in their disclosure in order to strengthen the legitimacy the firm has (Marquis, Toffel, & Zhou, 2016; Tashman, Marano, & Kostova, 2019). However, decoupling comes with risks, can be value-destroying and can also have negative legitimacy implications when the decoupling is discovered by the public (García-Sánchez et al., 2020; Tashman et al., 2019).
considerations in mind when making decisions, they also add the SEW of the company and themselves to the decision-making process, which entails non-financial aspects that can influence the CSR performed by the firm (Block & Wagner, 2014; Deephouse & Jaskiewicz, 2013). SEW is the non-economic utilities of a firm that meet the family’s affective needs (Gomez-Meija et al., 2007). These utilities can have various sources (Schulze & Kellermanns, 2015), such as positive family image and reputation, having social support from the community, group integrity, and a sense of self and identity for the firm (Berrone, Cruz, Gomez-Meija, & Larraza-Kintana, 2010). This SEW ensures that decisions are made with a different reference point in family firms than in nonfamily firms (Schulze & Kellermanns, 2015). As the decision-makers in the firm take non-financial aspects into account as well, they are more willing to accept risks with regard to the firm’s financial well-being if that means they prevent a loss of SEW (Schulze & Kellermanns, 2015). Unlike other types of firm owners, family owners of a firm can be identified quite easily by the local community of their firm, and in society at large (Block & Wagner, 2014). CSR decoupling could have a negative influence on the image and reputation of a firm, and as negative reputation spillovers from a firm can influence the family and vice versa (Deephouse & Jaskiewicz, 2013), it can be argued that family-owned firms would be more concerned with positive CSR performance (Block & Wagner, 2014).
Multiple papers using the SEW theory have focused on the CSR performance of family firms (Berrone et al., 2010; Cruz et al., 2014; Kim et al., 2016; Labelle, Hafsi, Francoeur & Amar, 2018). To my best knowledge there is only one paper, which is still in press, that combines the possibility of a relationship between family ownership of a firm and the amount of CSR decoupling they perform. This leaves a gap in the literature on both family firms and CSR decoupling. Conversely, there is still ambiguity whether family firms perform more socially responsible, less socially responsible or just as socially responsible as nonfamily firms. This research poses that due to the SEW of a family, a family-owned firm will perform less decoupling in the CSR area than nonfamily-family-owned firms. The occurrence of CSR decoupling and exposure of this phenomenon might harm a firm’s and family’s image and reputation.
Furthermore, the coverage by financial analysts has been researched in the area of CSR performance and financial performance, but little in the area of CSR decoupling. This study proposes that the presence of financial analysts negatively moderates the relationship between CSR decoupling and family ownership, as this presence leaves less room for decoupling due to increased visibility, and financial analysts would lose reputation as well if they reported on a firm that performs CSR decoupling due to lower accuracy of the report.
This paper searches to close part of this gap by researching the possible relation between the two phenomena of family firms and CSR decoupling, and extending the research on financial analysts and CSR decoupling. This will be done by researching the following two main questions:
RQ 1: What is the relationship between family-ownership and CSR decoupling?
RQ 2: How does financial analysts coverage moderate the relationship between family-ownership and
CSR decoupling?
In order to answer these research questions and test the aforementioned assumptions, a statistical analysis will be performed on a dataset, which is gathered from Thomson Reuters ASSET4, Bloomberg, I/B/E/S and Worldscope. The final sample consists of 128,182 observations for 8,023 unique firms in 68 different countries and 73 different industry sectors, during a time period from 2002-2017. The analysis is performed with a total of 30,784 observations. To gather the results for the hypotheses of this study, a panel regression analysis with a fixed-effects model will be performed. After performing the regression analysis, the first hypothesis that family-owned firms perform less CSR decoupling, was proven to be insignificant. The second hypothesis regarding the negative effect of the presence of financial analysts on the relationship between family ownership and CSR decoupling was proven to be true.
decoupling. Lastly, the knowledge on the effect of the coverage by financial analysts for firms is extended to CSR decoupling, instead of only focusing on CSR or firm performance. Family-owned firms do not engage less in CSR decoupling than nonfamily-owned firms, but the presence of financial analysts does moderate the relationship between CSR decoupling and family ownership. This results adds to the ambiguity in the literature, as the direction of the relationship between CSR decoupling and family ownership switches with the presence of financial analysts. This entails that financial analysts play an important role with regard to CSR decoupling.
The rest of the paper will pursue the following structure. In the Theoretical background, several theories on subjects will be touched upon, and hypotheses will follow from this discussion of theory. Hereafter, the Methodology is discussed. It describes the sample and data collection and the conceptualisation of the independent variable, the dependent variable, the moderating variable and the control variables, and the several statistical tests that will be performed. The Results section will explain the outcome of the statistical tests, and an acceptance or rejection of the hypotheses. The Discussion section will entail the discussion of the results, and how they affect the theory. The final section will include the conclusion and recommendations for future research. Furthermore, it will consider the limitations of this study.
Theoretical background and Hypothesis development
Family-owned firms and CSR
Identity, longevity, resource extension and a positive family image and reputation are all goals that have a high priority for family firms (Block & Wagner, 2014). One possible reason for why family firms assign this priority to more non-financial goals is the concept of socioemotional wealth (SEW). As mentioned in the introduction, SEW is the non-financial aspects and goals that are relevant for the firm and the family owners (Berrone et al., 2010; Gomez-Meija et al., 2007). The non-financial goals can be widespread, and take on many forms. One goal that can be coupled with SEW is a favourable reputation for the firm, as this enables and encourages family members to feel good about what they do and who they are (Deephouse & Jaskiewicz, 2013). A good reputation can ensure financial and non-financial benefits for a firm (Saeidi, Sofian, Saeidi, Saeidi, & Saaeidi, 2014). Furthermore, family involvement facilitates both the adoption of behaviour that is socially responsible and the implementation of CSR policies due to a certain set of attitudes (Nekhili et al., 2017). Additionally, due to the close connection between the family and firm reputation mentioned before, family-owned firms care more about the stability and strong relationships with external stakeholders (Nekhili et al., 2017). These firm characteristics for family firms might explain why decisions that family-owned firms take are not always completely logical, economically speaking (Hirigoyen & Poulain-Rehm, 2014).
CSR Decoupling
CSR decoupling can happen when the company’s policies don’t match with the implementation of the policy, or when an implemented policy does not have the intended outcome (Bromley & Powell, 2012). Organisations may choose to decouple in one of these two ways to avoid detection of inconsistencies and a loss of legitimacy (Jamali, 2010). Furthermore, firms may decouple as a reaction to clashing demands from shareholders and stakeholders. These clashing demands relate to being sustainable in the long-term, but being profitable in the short-term (García-Sánchez, Hussain, Khan, & Martínez-Ferrero, 2020). Firms can influence the opinions of the firm from outsiders by exaggerating their environmental performance, while at the same time trying to minimize the costs of this environmental compliance and CSR (Berrone et al., 2010). CSR reporting can be used to influence the perception of the public of the firm, and it is also used to enhance the perception of the social and environmental actions of the firm by the stakeholders. Firms have the freedom to select which CSR actions they disclose in their reports. This can result in biased reporting (Nekhili et al., 2017). For external stakeholders, it is difficult to assess the internal practices of the firm, as they can only consider it through the reporting of a firm (Crilly, Zollo, & Hansen, 2012). Biased reporting enables decoupling to happen, as they can choose to only report on actions which also match the CSR performance of the firm (Marquis et al., 2016; Tashman et al., 2019).
internal CSR actions (Hawn & Ioannou, 2016). This prevents them from gaining the full benefit of their internal CSR change (García-Sánchez et al., 2020).
Thus, there are many reasons for why a firm might choose to decouple their CSR performance from their CSR reporting, and there are different ways for how a firm can engage in CSR decoupling. Many firms engage in some form of CSR decoupling, either by overstating or understating their performance in their disclosure. Due to SEW, it can be imagined that family firms perform less CSR decoupling.
Family-owned firms and CSR Decoupling
An explanation can be given to why family-owned firms might have a lower tendency to pursue CSR decoupling. This explanation has to do with the term socioemotional wealth (SEW), which was also mentioned before. SEW is a term used in family business research, and it is the non-economic utilities that a firm engages in, in order to meet the family’s affective needs (Gomez-Meija et al., 2007). Often when family members have influence on the actions of the firm, the preservation of SEW takes a priority in the actions the firm undertakes. This focus on SEW influences the substance of the institutional compliance the firm engages in (Berrone et al., 2010). Furthermore, family owners are an easier target to pursue when a firm is accused of or debunked as a firm that engages in CSR decoupling, as they are irrevocably tied to the firm (Berrone et al., 2010). Due to this connection of a family member to a firm, the reputation of a firm can spill over to the family (members). When the reputation is well in the community, family members can use this for their own well-being. However, when the firm’s reputation is poor, it might disgrace the family members (Deephouse & Jaskiewicz, 2013). Therefore, a public condemnation over CSR decoupling could be detrimental to the family’s reputation (Berrone et al., 2010). So, family-owned firms should be more willing to pursue more environmentally friendly strategies, as a negative image of the firm would imply a direct decrease for the family’s and firm’s SEW (Berrone et al., 2010; Block & Wagner, 2014). Research by Dhaliwal et al. (2006) suggests that family firms may act in a more socially responsible way in order to protect their image and reputation. Furthermore, in the research of Kim et al. (2016), evidence was found that family-influenced firms have a higher propensity of turning attention into action regarding environmental policies, which entails a lower propensity to decoupling. The theory posed above leads to the hypothesis that family-owned firms would perform less CSR decoupling due to SEW. This can be summarized as:
H1: Family-owned firms perform less CSR decoupling than nonfamily-owned firms.
Financial analysts and CSR decoupling
Garcia-Sanchez, Hussain, Martinez-Ferrero & Ruiz-Barbadillo, 2019; Luo, Wang, Raithel & Zheng, 2015). Individual investors cannot buy shares directly from a firm, they have to obtain them via a brokerage house and make use of the information provided by the reports of financial analysts, who give buy or sell recommendations (Luo et al., 2015).
Voluntary disclosures can attract financial analysts to a firm, and firms with more informative disclosures have a larger number of analysts that are following the firm (Cormier & Magnan, 2014; Ioannou & Serafeim, 2015). When there are financial analysts that are forecasting and reviewing the firm, the information asymmetry between the firm and investors becomes smaller (Cormier & Magnan, 2014). The input of CSR information in the reports and forecasts by financial analysts has increased their forecast accuracy (Dhaliwal et al., 2012, García-Sánchez et al., 2020), as the financial analysts have a better and more complete information environment to assess a firm and its future. Furthermore, the amount of forecast errors of analysts decreases when stand-alone CSR reports are issued and information regarding CSR strengths are disclosed (Christensen et al., 2019; Dhaliwal et al., 2012). Analysts include CSR information in their reports, as investors increasingly demand this type of information in the reports (Luo et al., 2015).
However, when CSR decoupling comes into the picture, it affects the accuracy of the analysts’ forecasts, possibly because of noise surrounding the CSR information (García-Sánchez et al., 2020). The reporting of CSR weaknesses has a negative effect on analysts’ forecast errors (Christensen et al., 2019). The reports by financial analysts are used by investors for recommendations on whether to buy or sell stock of a firm (Luo et al., 2015). The income of the financial analysts comes from the investors who are willing to buy their shares via them. If there is a higher forecast error, due to the decoupling of CSR performance and disclosure, this could affect the analyst negatively and have a detrimental effect on their reputation. Nevertheless, as financial analysts follow the firm and the information asymmetry decreases, there is less room for a firm to decouple in the CSR department, as financial analysts play a central role in enhancing visibility and decreasing uncertainty of firms to stakeholders (García-Sánchez et al., 2020; Pollock & Gulati, 2007). Furthermore, the gap between a firm’s actual CSR performance and CSR disclosure can be picked up by financial analysts, as they often also have more private information of firms (Luo et al., 2015). The reasoning above poses a hypothesis that financial analysts would have a negative effect on the CSR decoupling a firm performs, entailing that they perform less CSR decoupling due to their presence. So, in order to further underpin the first hypothesis, the effect of financial analysts on the relationship between CSR decoupling and family firms will be researched. This can be summarized as:
H2: The attention of financial analysts has a negative moderating effect on performed CSR decoupling
Methodology
Sample and data collection
The dataset used in this paper is constructed using data from ASSET4 from Thomson Reuters, the Bloomberg database, the database of I/B/E/S, Boardex and Worldscope. From ASSET4, data on the CSR performance data of firms will be obtained. The data on CSR disclosure is gathered from the Bloomberg database. ASSET4 provides CSR information and investments analysis tools which professional investors can use to add into their traditional analysis for investment (Hawn & Ioannou, 2016). From I/B/E/S, the information on financial analyst following is extracted. The information on committee’s and boards can come from Boardex. Worldscope is used for accounting data.
The final sample in this paper consists of 128,182 observations for 8,023 unique firms. The time period taken in this sample is from 2002-2017. The firms in the sample are from a global perspective, and come from a total of 68 different countries. A significant portion of these firms is from Great Britain, Japan and the United States, but other continents and countries are also well-represented. Using two-digit SIC codes, the different industries in which the firms operate are distinguished. The firms in the sample operate in 73 different industry sectors. An explanation of the variables used in the analysis, with their measurement and source, can be found in Table 1.
Dependent variable
The dependent variable in this paper will be CSR decoupling. CSR decoupling is conceptualised and modelled after the papers by Hawn and Ioannou (2016) and Tashman et al. (2019), where the gap between external (CSR reporting) and internal actions (CSR performance) a firm performs is the amount of CSR decoupling a firm engages in. The gap is calculated by subtracting internal actions, so CSR performance, from external actions, so CSR reporting (E-I). When this gap is a negative number, it means that a firm performs more internal than external actions. This entails that that the firms do perform CSR policies, but do not disclose it to external actors.
Independent variable
The independent variable in this research is family-owned firms. Consequent with previous research, the threshold of the percentage of stocks that have to be held by family members is 5% (Berrone et al., 2010; Hirigoyen & Poulain-Rehm, 2014; Peng & Jiang, 2010). If the firm meets the threshold for percentage of stocks, it will be measured as a 1. If the firm does not meet the threshold, it will be marked as 0 (Berrone et al., 2010; Cruz et al., 2014).
Moderating variable
of I/B/E/S. This way, the variable establishes a measure for the visibility of the firm (Dhaliwal et al., 2012; Hawn & Ioannou, 2016; Ioannou & Serafeim, 2015).
Control variables
In addition to the variables mentioned above, several control variables will be used in order to capture other factors which could affect the independent, dependent and moderating variable. Several firm characteristics will be controlled for. Firstly, firm size will be controlled for, as larger firms are often more subject to scrutiny and a more close-up look from the media and their stakeholders, and larger firms are often associated with higher levels of CSR engagement (Block & Wagner, 2014; Cruz et al., 2014). Firm size will be approximated by taking the logarithm of the firm’s total sales (Berrone et al., 2010). Second, financial performance is added, as it is often used as a common predictor of
Table 1: Variable definition and measurement
Variables Measurement Source
CSR Decoupling CSR gap: CSR performance minus CSR disclosure (E-I)
Thomson Reuters ASSET4, Bloomberg Family ownership Binary variable, that takes the value of 1 if the
percentage of stocks held by family members is at least 5%, and 0 if that is not the case
Worldscope
Analyst coverage The number of analysts that cover the firm I/B/E/S Size The logarithm of the firm’s total sales Worldscope
Financial performance The firm’s annual ROA Worldscope
Ownership of individuals Percentage of stocks held by individual investors or employees
Worldscope Ownership by government Percentage of stocks held by a government or
government institution
Worldscope Ownership by endowment Percentage of stocks held by endowment or
pension funds
Worldscope Presence CSR committee The presence of a CSR committee in a firm Boardex RD expenses The ratio of Research and Development to total
sales
Worldscope Leverage The ratio of total financial debt to the total value
of assets
environmental performance. This will be measured as the firm’s annual ROA (Berrone et al., 2010). As a third, fourth, and fifth control variable, the percentage of ownership held by employees or individual investors, the percentage of ownership held by a government or government institution, and the percentage of ownership held by endowment or pension funds is added. This is to differentiate between the effects of family ownership and the effect that other large shareholders might have (Block & Wagner, 2014).
Board characteristics can also have an effect on CSR performance and disclosure. The presence of a CSR committee signals that there is a form of dedication and serious concerns on CSR and other non-financial performance. Furthermore, these firms have a higher propensity to report on their CSR policies and practices (Nekhili et al., 2017). This will be measured with a dummy variable by taking a 1 if a CSR committee is appointed, and a 0 if there is no CSR committee. Also, this analysis will be controlled for R&D expenses. R&D complements CSR by offering a firm competitive advantage over other firms (Nekhili et al., 2017). This is conceptualised as the ratio of R&D expenses to total sales. Extending firm characteristics, the firm leverage will be controlled for. Firms that have more long-term debt, will do more to have a positive consideration regarding the creditors' expectations of the CSR information (Nekhili et al., 2017). This is measured with the ratio of total financial debt to the total value of assets of the company.
Statistical tests
In order to prepare the dataset for the analysis, several steps were taken. Firstly, a dummy variable was made for the independent variable of family ownership. This was done, as this analysis does not test on the level of family ownership, but only on the measure of family ownership and nonfamily ownership. Secondly, in order to get a normal distribution for the control variable of size, the logarithm is taken of this variable. Lastly, an interaction variable was made in order to perform the moderator analysis. This entails multiplying the independent variable of family ownership with the moderator variable of financial analysts. As the analysis performed involves a moderator, and includes interactions variables, the dummy variable of family ownership was mean centred. This makes it easier to interpret the coefficients of the analysis later on.
Results
Table 2 reports the descriptive statistics and correlations for all the variables that are used in the statistical analysis. When looking at the descriptives of the variable CSR decoupling, it can be seen that while the minimum scores are negative and the maximum scores are positive, the mean is negative, which means that on average, most firms perform more internal than external actions. Furthermore, the average Analyst Coverage for a firm is 8.674, which indicates that the firms in this sample are visible to the public and relatively large (Hawn & Ioannou, 2016).
After checking the correlations, the correlations between Family Ownership and Individual Ownership and Analyst Coverage seemed to be on the higher side. A check for multicollinearity was performed by calculating the variance inflation factors (VIF). These VIFs were under the threshold of 10 for all variables, so multicollinearity is not a problem in this dataset.
In Table 3, the first two models show the outcome of the main panel regression analysis. Model 1 presents the results for the first hypothesis, by doing a regression of the effect on the dependent variable of CSR decoupling. H1 predicted that family-owned firms would perform less CSR decoupling than nonfamily-owned firms. The coefficient of family ownership in this model is negative and not significant (b = -0.057, p = 0.175), leaving H1 unsupported. However, the negative coefficient does point in the direction of the hypothesis, where family-owned firms perform less CSR decoupling. Model 2 presents the results for the second hypothesis, adding a moderator through an interaction variable of family ownership and presence of financial analysts to the regression. H2 predicted that the attention of financial analysts has a negative moderating effect on performed CSR decoupling. Looking at model 2, it is confirmed that the coefficient of the interaction variable in this model is negative and significant (b = -0.095, p= 0.002), supporting H2. This entails that the presence of more financial analysts has a negative effect on the amount of CSR decoupling of a firm. The implications of the insignificance of H1 will be discussed in the Discussion section below.
Additional analysis
addressing these different indicators, and if they perform better or worse than nonfamily-owned firms on these indicators. This could open up paths for further research, and give some additional information to the main analysis performed above. In this additional regression analysis, the same regression will be performed as above, however, the dependent variable in these regressions will be the three dimensions of ESG, and decoupling will be taken into account within those dimensions.
The models 3 to 8 in table 3 present the results of the additional regression analysis. Models 3 and 4 exhibit the results for the Environment dimension of ESG. What is striking in these two models is that in model 3, there is a significant, positive relationship between family ownership and Environment decoupling (b = 0,013, p= 0,057). This is different from the main analysis. However, when the interaction of financial analysts come into play, this significant relationship is no longer there. Models 5 and 6 display the results for the Social dimension of ESG. This dimension achieves different results from the Environment dimension. Where in the Environment dimension, a significant, positive relationship was found when the interaction of financial analysts and family ownership was not in place, with the Social dimension there is a significant, positive relationship when the interaction variable is added to the analysis (b = 0,018, p= 0,061). Furthermore, the variable of analyst coverage is not significant in these models (b = 0,000, p= 0,112) (b = 0,000, p= 0,153). This is different from both the other dimensions, and the main analysis on CSR decoupling. Lastly, models 7 and 8 show the results for the Governance dimensions of ESG. The results for this dimension are closer to the Environment dimension than the Social dimension. In model 7, without the interaction variable, there is a significant, positive relationship between Governance decoupling and family ownership (b = 0,015, p= 0,095). In each of the models with the different ESG dimensions, the interaction variable of family ownership and analyst coverage are not significant.
The implications of this additional analysis will be discussed further in the Discussion, where it will also be coupled to the main analysis and future research recommendations.
Discussion
The purpose of this study was to dive deeper into the relation between family ownership and CSR decoupling, looking from a SEW perspective. Furthermore, a focus was put on the possible moderating influence of the presence of financial analysts on the relation between family ownership and CSR decoupling. In order to test these relations, two hypotheses were formulated. The first hypothesis that was proposed, was that family-owned firms entails that less CSR decoupling is performed. The second hypothesis proposes that the presence of financial analysts negatively moderates the relationship of the first hypothesis.
could have to do with heterogeneity between family firms, followed by and connected to heterogeneity within the concept of SEW. The first has been a topic of research in multiple papers. In a paper by Déniz and Suárez (2005), a dataset of Spanish family firms was researched. They identified three separate clusters of family firms, which all had a different approach and orientation towards CSR. However, that research was only performed in a sample with Spanish firms. while this current study is performed in a worldwide dataset. Nevertheless, there are also studies that are conducted on a worldwide basis that adhere to the idea of heterogeneity between family firms. The research by Labelle et al. (2018) studied whether family firms perform better in corporate social performance (CSP) than nonfamily firms, and whether heterogeneity exists within the group of family firms. They argued that family firms tend to manage their CSP in such a way that there is an equilibrium between the preservation of their SEW and their financial performance (Labelle et al., 2018). After acknowledging that family firms in general performed less in CSP than their nonfamily counterfeits in their sample, they dove deeper into the family firm group. When looking inside the family firm group, the level of CSP became higher when the family’s control of the firm increased, but halted at a threshold of 36% voting rights (Labelle et al., 2018). This means that there is heterogeneity between family firms, in this example between different percentages of voting rights of the family.
The second reason stems from a paper by Berrone, Cruz, Gomez-Meija and Lazarra-Kintana (2012), where an extension to the SEW framework from 2007 is proposed. Five different dimensions combined, labelled as the FIBER dimensions, construct this extension of the SEW framework: Family control and influence, Identification with the firm, Binding social ties, Emotional attachment and Renewal of family bonds through dynastic succession. Papers that have used this extension to the framework, have found that there are different outcomes if the different dimensions of the SEW framework and family ownership are combined. As an example, Dayan, Ng and Ndubisi (2019) showed that these SEW dimensions should not be treated as one collective dimension when you are predicting family firm behaviour. In their research, only identification of family members with the firm had a significant and positive effect on sustainable products and processes in a firm, while the other dimensions had no significant total effect (Dayan et al., 2019). This also traces back to existing heterogeneity between family firms.
Another reason for the insignificance of the results of the tests for the first hypothesis could be that this study was performed with a dataset consisting of 73 different industry sectors. Examples of studies where family firms performed better in CSR than nonfamily firms were taken in a sample of polluting industries is by Berrone et al. (2010) and Kim et al. (2016). However, there might be vast differences between polluting and non-polluting industries, or other differentiations between industries.
is in line with other papers on the presence of financial analysts (Dhaliwal et al., 2012; García-Sánchez et al., 2020; Luo et al., 2015; Martínez-Ferrero et al., 2018). This moderator analysis also adds additional implications to the main analysis. In the first regression, in model 1, the moderating role of financial analysis is not taken into account. In this regression, family firms perform less CSR decoupling. However, in model 2, when the moderating role of financial analysts is taken into account, the relationship between family ownership and CSR decoupling is reversed and is a positive relationship. This entails that in the second model, family firms do perform more CSR decoupling than nonfamily-owned firms. This could have to do with the fact that when more analysts focus on a certain firm, there is more pressure to perform well in the short term, in order to have positive forecasts and gain more investors, while CSR projects take a more long-term approach (Qian, Lu, & Yu, 2019). As the investors look at the reports of these analysts, and form their perception and expectations of the firm, the pressure for firms to perform well heightens the chance of the occurrence of CSR decoupling (Graafland & Smid, 2019; Qian et al., 2019). However, looking at the negative coefficient of the moderating variable of financial analysts in model 2, the pressure from financial analysts also ensures that less CSR decoupling is performed by firms. So, family-owned firms perform more CSR decoupling, but the presence and interaction of financial analysts lowers the manifestation of CSR decoupling. This also adds to the two sides in the research of CSR decoupling in the family firm literature. Ambiguity exists in the research on the CSR and environmental performance of family firms. This ambiguity comes forward in this research as well, having a positive and a negative coefficient in the two models of the research. This necessitates more research on this subject, which has to go deeper to uncover where the ambiguity comes from.
Additional analysis delved into the dimensions below CSR: the ESG network. Exploration of these different dimensions gives distinct outcomes compared to the analysis of the two hypotheses. They diverged from the main analysis, and had differences between themselves as well. The divergence from the main analysis indicate that different dimensions within CSR decoupling can be influenced by family ownership in various ways. Furthermore, the differences between the different dimensions show that there is ambiguity within the build-up of CSR decoupling as well. The additional analysis gives more indications that there are more variables interacting in the relationship between family ownership and CSR decoupling than originally used in this research, and could be used to reduce the present ambiguity.
research provides more proof for the influence financial analysts can have on the environmental performance of firms (García-Sánchez et al., 2020; Luo et al., 2015; Martínez-Ferrero et al., 2018), and combines it with family ownership and CSR decoupling. However, the addition of financial analysts in the regression analysis provided a change in the direction of the relationship between family ownership and CSR decoupling. So, this research also feeds the ambiguity within the family business literature about family ownership and CSR (decoupling).
Conclusion, limitations and future recommendations
This research provides new insights in the area of CSR decoupling, combining it with the literature of family business. It adds to the conversation on whether family-owned firms are more or less socially responsible that their nonfamily-owned counterparts. It shows that in this global and multi-industry situation, family-owned firms do not perform less CSR decoupling than nonfamily-owned firms. Furthermore, this research adds to the literature area of financial analysts, and the influence they can have on firms in the area of CSR decoupling. The presence of financial analysts for a firm has a negative effect on the relationship between family ownership and CSR decoupling, meaning that the amount of CSR decoupling performed by a firm decreases.
limitation of this work refers to the measure of CSR decoupling. The measure used in this paper, first introduced by Hawn and Ioannou (2016), is still quite new. Overall, a conceptualisation for CSR decoupling has been similar to this measure, or a measure connecting to independent rating systems (Graafland & Smid, 2019). As the area of CSR decoupling is still fairly new, not much quantitative conceptualisations of the phenomenon exist. In future research, more studies could be conducted with a more quantitative approach to CSR decoupling, with a definition of this quantitative measure which entails the complex aspects of CSR decoupling.
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