This paper aims to explore why private equity (PE) cares about corporate social responsibility (CSR) of its investees given their relatively short investment time-horizon and how it designs corporate governance (CG) bundle to achieve both financial and CSR goals of the private firms it invests in.
Case study design is applied to get deeper insights on the why and how questions posed. Analysis is based on triangulation of secondary data and in-depth interviews with both PE and their investee firms.
The authors find that long-term sustainability supported by CSR increases firm value. They also outline specific CG bundle that the PE uses to achieve both its financial and CSR goals. CG mechanisms appeared to reflect agency theory, but even more resource dependence theory.
The outlined CG bundle could be used as a template for all types of private firm owners to improve both financial and CSR performance of the firm.
The paper adds to fragmented area of CG and CSR interface. The authors specifically focus on several under-researched contexts of this interface: private small and medium size firms (SMEs), emerging markets and PE investors.
