Political Connection and Corporate Social Responsibility: Product Market Competition

Government and politicians intervention in boards of directors' decision making may affect firms' business trajectory. A stock market should display informational efficiency and, therefore, should appropriately reflect the value of political connections, if any. This study is aimed to investigate the effect of political connections on corporate social responsibility, focusing on product market competition. The sample consists of 60 firms for the period from 2011 to 2016.. In order to measure social responsibility, Kinder, Lydenberg, & Domini Research Institution ranking is used. Also, research hypotheses are tested using a panel data model. The results show that any increases in political connection increases social commitment and accountability of managers. Firms are also divided into two groups according to the product market competition, and the results show that political connection has a positive impact on social responsibility in firms with high product market competition, however this is not so for firms with low market competition. Increasing competition is effective in increase of social responsibility.