International Diversification and Corporate Social Responsibility

Using a large sample of 3,040 U.S. firms and 16,606 firm-year observations over the 1991-2010 period, we find strong evidence that firm internationalization is positively related to the firm’s corporate social responsibility (CSR) rating. This finding persists when we use alternative estimation methods, samples, and proxies for internationalization and when we address endogeneity concerns. Next, we find that firm characteristics such as size, profitability, growth opportunities, R&D, and advertising expenses condition the link between internationalization and CSR. We finally provide novel evidence that firms with extensive foreign subsidiaries in countries with well-functioning political and legal institutions have better CSR ratings.