Does family control explain why corporate social responsibility affects investment efficiency?

Abstract Drawing on stakeholder and socioemotional wealth theories, we empirically examine the influence of corporate social responsibility performance on investment efficiency in family‐controlled businesses versus non‐family‐controlled businesses. Our panel dataset consists of 190 Pakistani firms listed on the Pakistan Stock Exchange over the period of 2007–2016. We use feasible generalized least square regression for model estimation. Our results suggest that firms with higher corporate social responsibility performance invest efficiently compared with firms with lower corporate social responsibility performance. Furthermore, the impact of corporate social responsibility performance on investment efficiency is higher in the family firms. The results suggest that family‐controlled businesses are more willing to engage in social responsibility activities to achieve their non‐economic goals, i.e. family image and trans‐generational control. Overall, our results indicate that corporate social responsibility is beneficial for the organization, and its implication is more fruitful in the context of family‐controlled businesses.