The paper "On the Foundations of Corporate Social Responsibility" by Hao Liang and Luc Renneboog examines the relationship between a firm's CSR rating and its country's legal origin. Using data from 23,000 companies across 114 countries, the authors find that firms from civil law countries, particularly Scandinavian civil law countries, have significantly higher CSR ratings than those from common law countries. This correlation is stronger than other factors such as firm and country characteristics, political institutions, and globalization. The study also suggests that civil law firms are more responsive to CSR shocks, as evidenced by quasi-natural experiments like scandals and natural disasters. The authors argue that the legal origin of a country shapes the governance and contracting environment, influencing how firms balance shareholder and stakeholder interests. The findings support the idea that CSR is not just a voluntary initiative but a fundamental tradeoff between shareholder and stakeholder focus, influenced by legal rules and societal preferences.The paper "On the Foundations of Corporate Social Responsibility" by Hao Liang and Luc Renneboog examines the relationship between a firm's CSR rating and its country's legal origin. Using data from 23,000 companies across 114 countries, the authors find that firms from civil law countries, particularly Scandinavian civil law countries, have significantly higher CSR ratings than those from common law countries. This correlation is stronger than other factors such as firm and country characteristics, political institutions, and globalization. The study also suggests that civil law firms are more responsive to CSR shocks, as evidenced by quasi-natural experiments like scandals and natural disasters. The authors argue that the legal origin of a country shapes the governance and contracting environment, influencing how firms balance shareholder and stakeholder interests. The findings support the idea that CSR is not just a voluntary initiative but a fundamental tradeoff between shareholder and stakeholder focus, influenced by legal rules and societal preferences.