ASSIGNMENT 2

SUBJECT CODE :
MPCS7103
SUBJECT TITLE :
COPRORATE GOVERNANCE & SOCIAL
RESPONSIBILITIES
LEVEL : MASTER’S LEVEL

STUDENT’S NAME :

ID NO. :

PROGRAMME :

LECTURER :

FACULTY/SCHOOL : BUSINESS
Assignment 2: (30%)
Article which has been chosen are as followed:

1. Quantifying CSR at the individual firm level

2. Social preferences and market imperfections motivate CSR

3. Rich information on CSR behaviour at the firm level

4. Certification of environmental standards of CSR

5. The impact of corporate social behaviour with insights of CSR.

1. Quantifying CSR at the individual firm level

While the concept of Corporate Social Responsibility (CSR) has been widely

discussed, there is neither general agreement about its definition nor a common way

of quantifying CSR at the individual firm level. Moreover, there are varying

interpretations in the literature about whether CSR improves firm performance and/or

whether improvements in CSR levels are necessary for firm survival at given

performance rates. One key way of looking at improvements in CSR, which we

pursue here, is that they form part of developing a modern enterprise in a

competitive environment. If a firm wants to survive, it must ‘follow the current’ and

improve its level of CSR. Not doing so reflects ‘managerial slack’, and will

subsequently result in firm closure.

From a policy perspective understanding the relationship between firm performance

and corporate governance in competitive and non-competitive industries,

respectively, is important for designing appropriate industrial policy. If improving

policies to improve corporate governance will be more efficient if focus is directed

towards non-competitive industries.

2. Social preferences and market imperfections motivate CSR

A complex set of social preferences and market imperfections motivate CSR. At the

same time, the evidence of the effects of CSR on firm performance and labour

compensation is mixed at best. However, managerial slack and decreasing profits

are also observed in cases where the delegated responsibilities to firm executives

lead to outcomes favoring the interests of stakeholders other than shareholders.

Second, competition may have differential effects on CSR adoption and firm

performance. If enterprises in competitive settings compete for socially responsible

consumers, CSR activities may be boosted by market competition, improving in turn

overall industry efficiency. On the other hand, realizing that CSR provides a

competitive edge, firms can use CSR strategically to raise entry barriers, increasing

relative levels of industry concentration through, for example, influence on the

regulatory system.

This may in turn reduce firm-level dynamics and industry-level productivity. Third,

employees can also be affected by CSR. Socially and environmentally responsible

firms have an advantage in hiring motivated and skilled employees, which yields

higher labour productivity. While employees in CSR firms may show higher levels of

dedication and success at work, they are also more likely to accept lower than
market wages compared to other workers.

3. Rich information on CSR behaviour at the firm level

We use four consecutive rounds of Vietnamese enterprise surveys from 2011 to

2014 (with rich information on CSR behaviour at the firm level) covering 5,185

enterprises (20,740 firm observations) to answer three empirical questions. Vietnam

is an illuminating case for exploring the potential impacts of CSR on firm-level

performance. Initially, social initiatives implemented at the firm level were partly

introduced through trade-related codes of conduct and partly through increasing

engagement by multinationals in Vietnam.

In 2007, the Global Compact Network Vietnam was launched to motivate

Vietnamese companies to implement and establish corporate policies relating to

labour and environmental standards, human rights. This came at the same time

Vietnam entered the World Trade Organisation (WTO), which increased exposure to

and knowledge about international standards. This in turn increased the need for

well-designed CSR strategies at the firm level to ensure sustainable integration of

Vietnamese enterprises into global supply chains.

Observing the full range of firm activities is difficult and so is measuring CSR, which

tends to address a range of stakeholder concerns and to be manifested in a variety

of activities, from certification of environmental standards to donations to the non-

profit sector. This leads to analytical problems in studies that link CSR behaviour and

firm performance. For example, the effect of CSR on firm performance may be

underestimated if the CSR metrics are noisy indicators of true CSR activities. Even

though crucial for establishing the mechanisms through which CSR affects

outcomes, simultaneous treatment of different forms of CSR within one study is, to

the best of our knowledge, generally missing in the literature.

5. The impact of corporate social behaviour with insights of CSR.

Our paper adds to the literature on the impact of corporate social behaviour on firm-

level performance with insights on how the effect of CSR differs by the level of

industry concentration and by the type of CSR engaged in. Focusing on different

manifestations of CSR, we also contribute to understanding how these potential

added benefits from CSR are distributed among stakeholders and workers. To our

knowledge, the present study is one of the first attempts to systematically map such

cross-firm CSR differences for a fast-growing transition economy.

Akerlof,G.A.,& Kranton, R. E. (2005). Quantifying CSR at the individual firm

Arellano, M. , & Bover, O. (1995). Social preferences and market imperfections

Bagnoli, M. , & Watts, S. G. (2003). Selling to social responsible consumers: Rich

Barrett,H.R.,Browne, A. W., Harris, P. J. C. , & Cadoret, K. (2002). Certification of

Bénabou, R. , & Tirole, J. (2010). The impact of corporate social behaviour with