The Independence of Judges and Corporate Social Responsibility

Senlin Miao, Gary Gang Tian, Fenghua Wen, Jinli Xiao

Journal of Business Ethics · 2024 · Volume 193 · Issue 3

Abstract

Limited research has focused on the influence of judge independence on firms' corporate social responsibility (CSR), despite extensive literature examining the impact of the legal environment on CSR. To address this gap, we analyze the staggered adoption of judicial delocalization reform in China. This reform aimed to enhance local judges' independence and our analysis shows that firms have exhibited higher CSR scores since its implementation. Our channel analysis reveals an increase in lawsuits and monetary claims against firms due to the reform, indicating that firms engage in CSR activities to mitigate the negative effects of legal proceedings. The impact of the reform on CSR is stronger for high-litigation-risk firms and weaker for politically connected firms. Moreover, the positive relationship between the reform and CSR is more pronounced in regions with higher levels of government interference with judges before the reform. In summary, our findings highlight the important role of a supportive legal environment in fostering CSR, emphasizing the influence of judge independence.

Keywords

Corporate social responsibility, Judicial independence, Judicial delocalization reform, Lawsuits, Local protectionism

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