Towards a Holistic View of CSR-related Management Control Systems in German companies: Determinants and Corporate Performance Effects
2021
Abstract As companies increasingly disclose Corporate Social Responsibility (CSR)-related information, they are expected to establish internal mechanisms within the organization that lead towards more sustainable behavior, such as integrating CSR-related aspects into existing management control systems. This paper examines the drivers of the existence of such CSR-related management control components and corresponding performance effects of German companies. Based on legitimacy theory, it argues that top-level managers’ perceived importance of CSR, stakeholder expectations and proactiveness influence the existence of CSR-related formal and informal controls. Top-level managers participated in the study by completing an online questionnaire. Using structural equation modelling, the paper finds that – as hypothesized – perceived importance of CSR, stakeholder expectations and proactiveness of the company is positively associated with the existence of CSR-related management controls. Moreover, it finds that the existence of CSR-related controls as well as proactiveness are positively associated with firm performance with regard to ensuring long-term survival. Based on the results, the paper suggests that companies should have a positive manner with regard to CSR and should proactively integrate corresponding aspects into their internal control mechanisms. Furthermore, by integrating CSR-related aspects into their management control systems, that comprise both formal and informal controls, companies can direct their CSR-related actions and achieve positive performance effects.
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