The impact of corporate governance on social and environmental engagement: what effect on firm performance in the food industry?

Purpose This paper aims to provide new evidence on firm-specific determinants and effects of corporate social and environmental responsibility (CSER) in the food industry. Design/methodology/approach The current study is designed to empirically answer dual related research questions. First, we investigate the extent to which effective corporate governance (CG) mechanisms foster CSER. Second, we analyse the impact of CSER engagement on corporate financial performance (CFP). Consistent with the research design, to avoid sample selection bias, the authors employed Heckman two-step model (1979) to a worldwide sample of 324 food firms between 2011 and 2017. Findings The findings of the study reveal that effective board characteristics foster CSER engagement. Furthermore, CSER engagement is a positive predictor of improved profitability and also reduces the cost of debt (COD). Originality/value This article has elements of originality regarding the research questions, the context and the method. First, the authors demonstrate that CSER is a "missing link" between CG and CFP in the food industry. The authors' contribution complements the debate on CSER and CFP through the stakeholder theory, the resource-based view and the innovation management perspective. They disentangle the effect of CG from the impact of social and environmental responsibility after correcting for endogeneity bias. The implications of the study contribute to a win-win scenario for companies investing in CG that result in higher CSER engagement, better profits and lower cost of capital.