Does environmental concern drive Asian firms’ governance?
| Published date | 02 January 2020 |
| Date | 02 January 2020 |
| Pages | 481-503 |
| DOI | https://doi.org/10.1108/JABS-06-2019-0189 |
| Author | Aditi Mitra,Sanjaya Singh Gaur |
| Subject Matter | Strategy,International business |
Does environmental concern drive
Asian firms’governance?
Aditi Mitra and Sanjaya Singh Gaur
Abstract
Purpose –The sustainability issues faced by Asian firms, such as environmental destruction and
depletion of resources,require the existing corporate socialresponsibility (COSR) models to be carefully
examined and re-conceptualized. Both researchers and practitionershave indicated how social equity
and having a long-term business perspective are imperative to address environmental concerns
alongside fulfillingthe wealth maximization goals among firms. The purposeof this study is to contribute
to the literature by examiningthe interrelationships between COSR parametersamong firms, with social
equityperspective.
Design/methodology/approach –The data for this study comes from the Thomson Reuters Asset4
Index. The baseline sample of this study included 1,690 firms listed between 2011 and 2017. For
hypothesis testing, fixed-effect panel analysis on 10,140 firm-year observations over seven years from
2011 to 2017 was conducted. These data points were drawn from four Asian countries (Malaysia,
Thailand,Singapore and Hong Kong).
Findings –This study indicatesthat developed stock exchange markets among Asianmarkets such as
Singapore andHong Kong are transitioning from a strong focus on environmentalissues to a more social
equity-basedeconomy, which is driving higher governanceperformance. This indicates the significance
of the social dimensioninherent in sustainable developmentand goes beyond just the ethical dimensions
among the firms and the economy at large. The study also presents the challenges of re-modeling
existing COSR framework among firms in Asia which do not have a clear road map on how to achieve
environmental performance to achieve higher levels of human well-being, as well as the ethical
considerationsof achieving the wealth maximizationgoal.
Originality/value –This paper is unique in nature because it attempts to re-conceptualize the COSR
models that support governance initiatives from an Asian market perspective by improving upon
environmental performance, which in turn addresses critical issues around depleting resources and
reducing wastagein the production process. The re-conceptualization model usedin this study is based
on the social exchange theory developedby George Homans in 1958. Accordingly,this study links the
circular flowof resource procurement as well as production to the circularflow of resource replenishment
seen in thechosen emerging Asian markets.
Keywords Emerging markets, Environmental performance, Asian markets, Social equity,
Governance in Asia
Paper type Research paper
1. Introduction
Detrimental environmental activities leading to resource depletion have been a growing
concern among businesses in Asia. Researchers (Rao, 2019;Murray et al., 2017;Mitra
et al., 2019) advocate that integrating environmental performance with societal equity is a
way to manage this concern. This integration also helps firms in Asia manage and plan for
their limited resource access (Fornes et al.,2019;Laskar, 2018;Koh et al.,2014;Cheng
et al.,2014
). At the same time, impending COSR issues such as non-strategic
environmental policies (Marquis and Qian, 2014;Chun et al.,2013) and challenging
governance systems among firms in Asia (Wang and Bansal, 2012;Wang and Qian, 2011)
emphasize the urgent need to re-conceptualize the corporate social responsibility (COSR)
Aditi Mitra is based at
Sunway University, Bandar
Sunway, Malaysia.
Sanjaya Singh Gaur is
based at the NYU School of
Professional Studies, New
York University, New York,
New York, USA.
Received 19 June 2019
Revised 28 October 2019
10 November 2019
Accepted 24 November 2019
DOI 10.1108/JABS-06-2019-0189 VOL. 14 NO. 4 2020, pp. 481-503, ©Emerald Publishing Limited, ISSN 1558-7894 jJOURNAL OF ASIA BUSINESS STUDIES jPAGE 481
models in Asia (Rakowski, 2018;Yanget al., 2018;Murray et al.,2017;Gaur et al.,2019)for
better environmental andgovernance performance.
An efficient COSR business model is where firmscan achieve greater economic benefits by
having a long-term perspective (Fornes et al., 2019;Yang et al., 2018;Mitra et al.,2019;
OECD, 2016). Researchers (Junior et al., 2014;Russo and Tencati, 2009;Dossa and
Kaeufer, 2014;Mitra et al., 2019) advocate that the re-conceptualization of the COSR
business models can lead to improved environmental performance and better social
contribution to the nation, which in turn wouldallow firms to gain a long-term perspective. In
the past, researchers (Zhao and Murrell, 2016;Bridoux and Stoelhorst, 2014;Harrison and
Bosse, 2013) have investigated the interrelationship between COSR and financial
performance among firms in Asian markets; however, these studies have been insufficient
in establishing the ways to strategizeenvironmental performance among firms. In particular,
these studies have not been able to clearly indicate how firms can effectively manage
environmental resource depletion and attain social equity and improve governance
mechanism owing to various conceptual and methodological concerns (Shapiro et al.,
2018). Therefore, to overcome the social cost of achieving the value maximization goal,
firms operating in the Asian markets are now moving toward re-conceptualizing the COSR
models to achieve sustainablebusinesses with a long-term focus.
COSR is reflected in firms’ responsible behavior toward their own actions, namely,
compassion toward the environment and society, and incorporating good governance
practices (Miska et al.,2018). This is more relevant in Asian markets which still continue to
consume natural resources as they embark on the path to development, sometimes without
considering the negative impacts that come with it (Yang et al., 2018;Yiu et al.,2018;Koh
et al.,2014
;Cheng et al.,2014; Christopher and Cuili, 2014; Chun et al., 2013;Wang and
Bansal, 2012;Wang and Qian, 2011). Additionally, firms operating in Asian markets also
tend to follow government policy directions as a means to fulfilling the regulatory
requirements (Orcos et al.,2018;Singh and Delios, 2017). As a result, firms often ignore
environmental and social concerns, thereby incurring social cost to achieve the value
maximization goal.
Investigating COSR constructs by re-conceptualizing the model has received the recent
attention of both practitioners and academic researchers (Fornes et al., 2019). According to
Lu et al. (2014), sustainability parameters may be investigated from the perspective of the
firm’s individual social behavior during business transactions to find how COSR models can
be re-conceptualized by that firm. Lee et al. (2018) advocate that individuals or firms often
compare between resource allocation and reuse alternatives before investing in societal
causes. Similarly, the degree of COSR initiatives undertaken is influenced by a country’s
belief toward the policies that contribute to the wealth of that particular nation (Fornes et al.,
2019;Rao, 2019;Ioannou and Serafeim, 2012). This makes it all the more fitting that these
concepts should come together.
In the above backdrop, this paper explains the inter-relationship between individual COSR
parameters that can in turn lead to the re-conceptualization of COSR models among firms in
Asia. The key assumption is that when firms in a country re-invent their COSR models, the
emphasis of government policies moves from solely focusing on environmental or
governance initiatives to greater societal equity (Lewellyn and Bao, 2017). This in turn
results in a long-term business focus and potentially drives the firm’s COSR motivations.
Accordingly, this study investigates the relationship between environmental performance
among firms in two emerging markets in Asia as well as two emerged markets in Asia and
their governance performance.This association aims to extend our knowledge on how firms
in the four chosen markets (Malaysia, Singapore, Hong Kong and Thailand) have re-
conceptualized the COSR models and how the re-conceptualization of COSR models is
influenced by the embedded societalnorms that exists in that nation.
PAGE 482 jJOURNAL OF ASIA BUSINESS STUDIES jVOL. 14 NO. 4 2020
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