**4. Theories, empirics, and hypotheses**

Unlike developed economies, developing countries often face some structural problems, such as poverty, deadly diseases, corruption, water and air pollution, and natural hazards, besides the well-known institutional and market lagging issues, such as regulatory forbearance, weak governance, and absence of market players for corporate control [29, 30]. In such markets, both the stakeholder theory and legitimacy theory can be put into place to discuss the board structure and CSR nexus. The stakeholder theory presumes that board members' personal and social background is critical to building a long-term sustainable relationship with the stakeholders [31]. In other words, stakeholder theory emphasizes ethical behavior, mutual interest, sustainability, and long-term relationship, which influence corporates to engage in CSR activities [32]. This implies that firms with a more diverse board tend to be more socially accountable than firms with relatively a weak board structure.

Likewise, legitimacy theory focuses on cultivating a long-term relationship with society to show the reasons for doing business in society and legitimate business activities by societal and regulatory forces. Legitimacy is a process to increase the trust of the external people. It includes stakeholder theory at the center point and focuses on the business's long-term success at the gravity level by building reputational capital. Such practice motivates firms to undertake more CSR activities to

legitimate their existence for a social cause beyond economic profits [33]. For that matter, it is the responsibility of the board to undertake activities that would enhance the financial performance of the business on the one hand and legitimize business operations on the other hand by gaining social trust. Therefore, both the stakeholder theory and legitimacy theory emphasize nurturing relationships with the stakeholders, although the former focuses more on building relationships with the powerful stakeholders while the latter discusses the importance of society as a whole to ensure long-term success [34]. Thus, we anchor on the stakeholder and legitimacy theories to explain the link between board structure and CSR spending by banks in Bangladesh.

The surrogates of board structure are board size, board independence, gender diversity on the board, and the number of board meetings. Board size is critical to promoting and monitoring CSR activities among these board elements because larger boards tend to have more voices on corporate CSR activities, such as investment in health, education, and the environment [5, 13]. However, extant literature provides mixed results on the relationship between board size and CSR performance. For example, some studies revealed a positive relationship between board size and CSR performance [28, 35, 36], while some noted an insignificant relationship between them [37, 38]. This difference in empirical results is attributed to the country-specific factors, such as corruption, business cultures, and enforcement status, of laws and regulations, suggesting more studies to accumulate knowledge.

Likewise, independent directors are instrumental in checking the social obligations of a firm because they are nonexecutive directors without having any pecuniary relationship with the firm. Also, independent directors want to protect their reputation by serving as a watchdog on the board and directing management to choose value-enhancing activities. Thus, independent directors have the power to refrain managers from building their empires through better monitoring [39]. However, similar to board size, extant studies show confounding results between board independence and CSR performance. Some studies highlighted a significant positive association between board independence and CSR performance [11–13]. On the other hand, some scholars noted a negative relationship [35, 40], while others did not find any significant connection between them. This mixed results in the relationship between board independence and CSR spending lie in the fact that independent directors may not function accurately in developing countries due to pressures from owner directors and fear of losing their job [41].

Another vital board element is the board gender diversity. Scholars argue that female representation on the board facilitates more discussion on CSR issues because women are likely to have more sensitive to ethical behavior, corporate philanthropy, and environmental pollution [42, 43]. Also, women directors tend to raise diverse issues related to women empowerment, thereby promoting gender equality in the workplace. Furthermore, women can address the concerns of various stakeholders more effectively, thereby increasing customers' loyalty and leading to financial profits. However, akin to board size and board independence, empirical works unearth inconclusive results between board gender diversity and CSR performance. Some scholars revealed a significant positive connection between female directors on board and CSR performance [44–46]. Conversely, some documented a significant negative link between them [12, 47], while others found no meaningful connection [37, 48].

Finally, board meetings can impact the CSR activities of the firm because frequent board meetings create enough room for evaluating CSR activities and help to take corrective measures to improve CSR performance. However, empirical studies concerning the link between CSR and the frequency of board meetings are

*Does Board Structure Matter in CSR Spending of Commercial Banks? Empirical Evidence… DOI: http://dx.doi.org/10.5772/intechopen.105589*

scant. Most scholars found no significant association between them [35]. We argue that in developing economies, such as Bangladesh, which has improper checks and balancing systems, frequent board meetings can help monitor the guile behavior of the management, resulting in the higher allocation of funds to CSR activities and more disclosure of nonfinancial information about the social and environmental practices by firms.

The above discussion clarifies that the connection between board structure and CSR spending is not univocal. The empirical results are confounding and often driven by a country's economic structure, cultural understanding, institutional developments, and national commitments. Nevertheless, as Bangladesh has shown remarkable progress in allocating funds to CSR activities over the last couple of years, we surmise that board elements will be positively associated with CSR spending by banks. Accordingly, we develop the following hypothesis to examine the nexus of board structure and CSR performance.

**H1**: There is a positive relationship between board elements, such as board size, board independence, board gender, board meetings, and CSR spending by banks.
