The influence of political institutions on corporate behavior has emerged as a hot topic, with special attention paid to those institutions that shape a country’s level of democracy. Building on institutional and corporate citizenship theories, this study explores how formal (i.e., electoral pluralism, government functioning, civil liberties) and informal (i.e., political culture, citizen participation) political institutions associated with the democratic level of a country impact corporate social responsibility (CSR). Drawing on 27,694 firm-year observations from 2016 to 2023, across 4,072 firms in 63 countries, we find that companies operating in political systems with robust electoral processes, strong civil liberties, and high levels of political participation tend to engage more actively in CSR. These results show the important role of those political institutions that underpin democracy in corporate responsible behavior.
Díaz-Portugal et al. (Tue,) studied this question.