We examine the effects of internal and external corporate governance and monitoring mechanisms on the choice of corporate social responsibility (CSR) engagement and the value of firm engaging in CSR activities. Employing a large and extensive sample during the 1993-2004 period, we find that the CSR choice is associated with firm characteristics such as firm size, leverage, R&D, and profitability, as well as governance characteristics including board leadership, board independence, institutional ownership, analyst following, and anti-takeover provisions. After correcting for the endogenous treatment effect and selection bias, respectively, our results show that contrary to the CSR over-investment argument, CSR engagement positively influences firm value measured by industry-adjusted Tobin’s q. In contrast, while the impact of analyst following on firm value is strongly positive, board leadership, board independence, blockholders’ ownership, and institutional ownership play a relatively weaker role in enhancing firm value.
