Examining the financial slack–corporate social performance relationship across countries: The influence of formal institutions
De Roo,Michiel Wickert,Christopher van der Laan,Gerwin Elfring,Tom Zapkau,Florian B.
De Roo,Michiel
Wickert,Christopher
van der Laan,Gerwin
Elfring,Tom
Zapkau,Florian B.
Abstract
Research on the relationship between financial slack and corporate social performance (CSP) provides ambiguous findings and is context-dependent. This study employs institutional theory to address this ambiguity and theorizes how formal institutions influence the relationship between financial slack and CSP. We argue that the relationship between financial slack and CSP is not per se positive or negative but depends on critical formal institutions, namely, government integrity, labor freedom, and financial freedom. Formal institutions define a country's incentive structures and, therefore, affect firms' decisions to allocate financial slack to Corporate Social Responsibility (CSR) activities, which impact CSP in turn. Our findings are based on a large dataset of firms across 38 countries. Our multilevel study expands prior research on the financial slack-CSP relationship by demonstrating how the relationship depends on the formal institutional context. Moreover, we contribute to international business research by illustrating how formal institutions in different countries provide incentive structures for firms to allocate financial slack to CSR activities. Finally, our study offers practical implications for firms aiming to improve their CSP and whose operations reach across different country-specific formal institutions across the globe.
Description
Date
2025-12
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
Corporate social performance, Financial slack, Formal institutions, International business, Multilevel study, SDG 12 - Responsible Consumption and Production
Citation
De Roo, M, Wickert, C, van der Laan, G, Elfring, T & Zapkau, F B 2025, 'Examining the financial slack–corporate social performance relationship across countries : The influence of formal institutions', Journal of International Management, vol. 31, no. 6, 101278. https://doi.org/10.1016/j.intman.2025.101278
License
info:eu-repo/semantics/openAccess