The Effect of Independent Director Reputation Incentives on Corporate Social Responsibility: Evidence from China

This paper examines the effect of independent director reputation incentives on corporate social responsibility (CSR). Using an unbalanced panel of 3765 Chinese-listed firms between 2009 and 2014, this study suggests that independent director reputation incentives improve CSR. Furthermore, it is found that this effect is more pronounced in non-state-owned enterprises (non-SOEs) than in state-owned enterprises (SOEs). In addition, our results also show that the effect of independent director reputation incentives on CSR is moderated by firm size, and this effect is much stronger in relatively larger firms. Together, these results suggest that reputation is an effective mechanism that can motivate independent directors to fulfill their role of monitoring and advising CSR, especially in non-SOEs and relatively larger firms. We add new insights to the research on the topics of independent director system, protection of the stakeholders’ interests, and CSR enhancement.