Share:


The heterogeneous effects of CSR dimensions on financial performance – a new approach for CSR measurement

    Rongjia Su   Affiliation
    ; Chunping Liu   Affiliation
    ; Weili Teng   Affiliation

Abstract

This paper investigates the differential effects of corporate social responsibility (CSR) dimensions on corporate financial performance (CFP) across sectors in China. This research uses a unique data set provided by China Stock Market and Accounting Research (CSMAR), showing expenditure on CSR programs from 568 Chinese publicly traded firm-year observations from 2008 to 2017. Compared to previous studies using scores produced by extra-financial rating agencies, this research quantifies CSR efforts by corporate expenditure on CSR practices, which offers quantitative and precise information in explaining the CSR-CFP link. The results show that the dimension of the environment has negative effects on financial performance in capital-intensive manufacturing industries. The impact of HR expenditure on CFP is negative in the tertiary sector and resourceintensive manufacturing industries. However, CSR investments in the community are positively related to financial performance in resource-intensive industries and other secondary sector (mining, construction, and utilities). Firms, in general, could gain benefits when spending more on business and financial stakeholders.

Keyword : corporate social responsibility, corporate financial performance, stakeholder theory, extra-financial rating agencies, human resources, community, environment, business and financial stakeholders

How to Cite
Su, R., Liu, C., & Teng, W. (2020). The heterogeneous effects of CSR dimensions on financial performance – a new approach for CSR measurement. Journal of Business Economics and Management, 21(4), 987-1009. https://doi.org/10.3846/jbem.2020.12394
Published in Issue
May 20, 2020
Abstract Views
6514
PDF Downloads
4569
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

References

Albuquerque, R., Koskinen, Y., & Zhang, C. (2019). Corporate social responsibility and firm risk: Theory and empirical evidence. Management Science, 65(10), 4451–4469. https://doi.org/10.1287/mnsc.2018.3043

Alshehhi, A., Nobanee, H., & Khare, N. (2018). The impact of sustainability practices on corporate financial performance: Literature trends and future research potential. Sustainability, 10(2), 1–25. https://doi.org/10.3390/su10020494

Avetisyan, E., & Ferrary, M. (2013). Dynamics of stakeholders’ implications in the institutionalization of the CSR field in France and in the United States. Journal of Business Ethics, 115(1), 115–133. https://doi.org/10.1007/s10551-012-1386-3

Barla, P. (2007). ISO 14001 certification and environmental performance in Quebec’s pulp and paper industry. Journal of Environmental Economics and Management, 53(3), 291–306. https://doi.org/10.1016/j.jeem.2006.10.004

Berman, S. L., Wicks, A. C., Kotha, S., & Jones, T. M. (1999). Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance. Academy of Management Journal, 42(5), 488–506. https://doi.org/10.5465/256972

Bhattacharya, A., Good, V., Sardashti, H., & Peloza, J. (2020). Beyond warm glow: The Risk-mitigating effect of Corporate Social Responsibility (CSR). Journal of Business Ethics, 161, 1–20. https://doi.org/10.1007/s10551-020-04445-0

Brammer, S., Brooks, C., & Pavelin, S. (2006). Corporate social performance and stock returns: UK evidence from disaggregate measures. Financial Management, 35(3), 97–116. https://doi.org/10.1111/j.1755-053X.2006.tb00149.x

Bravo, R., Buil, I., de Chernatony, L., & Martínez, E. (2017). Brand Identity management and Corporate Social Responsibility: An analysis from employees’ perspective in the banking sector. Journal of Business Economics and Management, 18(2), 241–257. https://doi.org/10.3846/16111699.2016.1209785

Brekke, K. A., & Nyborg, K. (2008). Attracting responsible employees: Green production as labor market screening. Resource and Energy Economics, 30(4), 509–526. https://doi.org/10.1016/j.reseneeco.2008.05.001

Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34(4), 39–48. https://doi.org/10.1016/0007-6813(91)90005-G

Cavaco, S., & Crifo, P. (2014). CSR and financial performance: complementarity between environmental, social and business behaviours. Applied Economics, 46(27), 3323–3338. https://doi.org/10.1080/00036846.2014.927572

Chatterji, A. K., Levine, D. I., & Toffel, M. W. (2009). How well do social ratings actually measure corporate social responsibility? Journal of Economics & Management Strategy, 18(1), 125–169. https://doi.org/10.1111/j.1530-9134.2009.00210.x

Cheung, Y.-L., Jiang, K., & Tan, W. (2012). “Doing-good” and “doing-well” in Chinese publicly listed firms. China Economic Review, 23(4), 776–785. https://doi.org/10.1016/j.chieco.2012.03.013

Clarkson, M. E. (1995). A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review, 20(1), 92–117. https://doi.org/10.5465/amr.1995.9503271994

Contini, M., Annunziata, E., Rizzi, F., & Frey, M. (2020). Exploring the influence of Corporate Social Responsibility (CSR) domains on consumers’ loyalty: An experiment in BRICS countries. Journal of Cleaner Production, 247, 119–158. https://doi.org/10.1016/j.jclepro.2019.119158

Crifo, P., Diaye, M. A., & Pekovic, S. (2016). CSR related management practices and firm performance: An empirical analysis of the quantity–quality trade-off on French data. International Journal of Production Economics, 171(Part 3), 405–416. https://doi.org/10.1016/j.ijpe.2014.12.019

Daszynska-Zygadlo, K., Slonski, T., & Zawadzki, B. (2016). The market value of CSR performance across sectors. Engineering Economics, 27(2), 230–238. https://doi.org/10.5755/j01.ee.27.2.13480

Delmas, M. A., Nairn-Birch, N., & Lim, J. (2015). Dynamics of environmental and financial performance: The case of greenhouse gas emissions. Organization & Environment, 28(4), 374–393. https://doi.org/10.1177/1086026615620238

Derwall, J., Guenster, N., Bauer, R., & Koedijk, K. (2005). The eco-efficiency premium puzzle. Financial Analysts Journal, 61(2), 51–63. https://doi.org/10.2469/faj.v61.n2.2716

Dixon-Fowler, H. R., Slater, D. J., Johnson, J. L., Ellstrand, A. E., & Romi, A. M. (2013). Beyond “does it pay to be green?” A meta-analysis of moderators of the CEP–CFP relationship. Journal of Business Ethics, 112(2), 353–366. https://doi.org/10.1007/s10551-012-1268-8

Donaldson, T., & Preston, L. E. (1995). The stakeholder theory of the corporation: Concepts, evidence, and implications. Academy of Management Review, 20(1), 65–91. https://doi.org/10.5465/amr.1995.9503271992

Falck, O., & Heblich, S. (2007). Corporate social responsibility: Doing well by doing good. Business Horizons, 50(3), 247–254. https://doi.org/10.1016/j.bushor.2006.12.002

Fan, J. P., Wei, K. J., & Xu, X. (2011). Corporate finance and governance in emerging markets: A selective review and an agenda for future research. Journal of Corporate Finance, 17(2), 207–214. https://doi.org/10.1016/j.jcorpfin.2010.12.001

Filbeck, G., & Gorman, R. F. (2004). The relationship between the environmental and financial performance of public utilities. Environmental and Resource Economics, 29(2), 137–157. https://doi.org/10.1023/B:EARE.0000044602.86367.ff

Flammer, C., Hong, B., & Minor, D. (2019). Corporate governance and the rise of integrating corporate social responsibility criteria in executive compensation: Effectiveness and implications for firm outcomes. Strategic Management Journal, 40(7), 1097–1122. https://doi.org/10.1002/smj.3018

Forget, V. (2012). Doing well and doing good: A multi-dimensional puzzle. https://hal.archives-ouvertes.fr/hal-00672037/document

Freeman, R. E. (1984). Strategic management: A stakeholder approach. Pitman.

Fukukawa, K., & Moon, J. (2004). A Japanese model of corporate social responsibility? A study of website reporting. Journal of Corporate Citizenship, 16, 45–59.

Galema, R., Plantinga, A., & Scholtens, B. (2008). The stocks at stake: Return and risk in socially responsible investment. Journal of Banking & Finance, 32(12), 2646–2654. https://doi.org/10.1016/j.jbankfin.2008.06.002

Gimenez, C., Sierra, V., & Rodon, J. (2012). Sustainable operations: Their impact on the triple bottom line. International Journal of Production Economics, 140(1), 149–159. https://doi.org/10.1016/j.ijpe.2012.01.035

Girerd-Potin, I., Jimenez-Garcès, S., & Louvet, P. (2014). Which dimensions of social responsibility concern financial investors? Journal of Business Ethics, 121(4), 559–576. https://doi.org/10.1007/s10551-013-1731-1

Godfrey, P. C., & Hatch, N. W. (2007). Researching corporate social responsibility: An agenda for the 21st century. Journal of Business Ethics, 70(1), 87–98. https://doi.org/10.1007/s10551-006-9080-y

Hancock, J. I., Allen, D. G., Bosco, F. A., McDaniel, K. R., & Pierce, C. A. (2013). Meta-analytic review of employee turnover as a predictor of firm performance. Journal of Management, 39(3), 573–603. https://doi.org/10.1177/0149206311424943

Hermawan, M., & Mulyawan, S. (2014). Profitability and Corporate Social Responsibility: An analysis of Indonesia’s Listed company. Asia Pacific Journal of Accounting and Finance, 3(1), 15–31.

Hess, K., Gunasekarage, A., & Hovey, M. (2010). State-dominant and non-state-dominant ownership concentration and firm performance: Evidence from China. International Journal of Managerial Finance, 6(4), 264–289. https://doi.org/10.1108/17439131011074440

Hillman, A. J., & Keim, G. D. (2001). Shareholder value, stakeholder management, and social issues: what’s the bottom line? Strategic Management Journal, 22(2), 125–139. https://doi.org/10.1002/1097-0266(200101)22:2<125::AID-SMJ150>3.0.CO;2-H

Hoepner, A. G., & Yu, P. S. (2010). Corporate social responsibility across industries: When can who do well by doing good? http://ssrn.com/abstract=1284703

Huselid, M. A. (1995). The impact of human resource management practices on turnover, productivity, and corporate financial performance. Academy of Management Journal, 38(3), 635–672. https://doi.org/10.2307/256741

Inoue, Y., Iii, J. E. M., & Kent, A. (2013). Enhancing the benefits of professional sport philanthropy: The roles of corporate ability and communication strategies. Sport Management Review, 16(16), 314–325. https://doi.org/10.1016/j.smr.2012.10.003

Inoue, Y., & Lee, S. (2011). Effects of different dimensions of corporate social responsibility on corporate financial performance in tourism-related industries. Tourism Management, 32(4), 790–804. https://doi.org/10.1016/j.tourman.2010.06.019

Jiang, W., & Wong, J. K. (2016). Key activity areas of corporate social responsibility (CSR) in the construction industry: A study of China. Journal of Cleaner Production, 113, 850–860. https://doi.org/10.1016/j.jclepro.2015.10.093

Johnson, R. A., & Greening, D. W. (1999). The effects of corporate governance and institutional ownership types on corporate social performance. Academy of Management Journal, 42(5), 564–576. https://doi.org/10.2307/256977

Kacperczyk, A. (2009). With greater power comes greater responsibility? Takeover protection and corporate attention to stakeholders. Strategic Management Journal, 30(3), 261–285. https://doi.org/10.1002/smj.733

Khattak, S. I., Jiang, Q., Li, H., & Zhang, X. (2019). Corporate social responsibility (CSR) and leadership: Validation of a multi-factor framework in the United Kingdom (UK). Journal of Business Economics and Management, 20(4), 754–776. https://doi.org/10.3846/jbem.2019.9852

Kamatra, N., & Kartikaningdyah, E. (2015). Effect corporate social responsibility on financial performance. International Journal of Economics and Financial Issues, 5(1S), 157–164.

Kang, C., Germann, F., & Grewal, R. (2016). Washing away your sins? Corporate social responsibility, corporate social irresponsibility, and firm performance. Journal of Marketing, 80(2), 59–79. https://doi.org/10.1509/jm.15.0324

Kao, E. H., Yeh, C. C., Wang, L. H., & Fung, H. G. (2018). The relationship between CSR and performance: Evidence in China. Pacific-Basin Finance Journal, 51, 155–170. https://doi.org/10.1016/j.pacfin.2018.04.006

Lanis, R., & Richardson, G. (2012). Corporate social responsibility and tax aggressiveness: An empirical analysis. Journal of Accounting and Public Policy, 31(1), 86–108. https://doi.org/10.1016/j.jaccpubpol.2011.10.006

Lee, M. J., & Jang, S. S. (2007). Market diversification and financial performance and stability: A study of hotel companies. International Journal of Hospitality Management, 26(2), 362–375. https://doi.org/10.1016/j.ijhm.2006.02.002

Li, W., & Zhang, R. (2010). Corporate social responsibility, ownership structure, and political interference: Evidence from China. Journal of Business Ethics, 96(4), 631–645. https://doi.org/10.1007/s10551-010-0488-z

Luo, X., & Bhattacharya, C. B. (2006). Corporate social responsibility, customer satisfaction, and market value. Journal of Marketing, 70(4), 1–18. https://doi.org/10.1509/jmkg.70.4.001

Maignan, I., & Ralston, D. A. (2002). Corporate Social Responsibility in Europe and the U.S.: Insights from businesses’ self-presentations. Journal of International Business Studies, 33(3), 497–514. https://doi.org/10.1057/palgrave.jibs.8491028

Mattingly, J. E., & Berman, S. L. (2006). Measurement of corporate social action: Discovering taxonomy in the Kinder Lydenburg Domini ratings data. Business & Society, 45(1), 20–46. https://doi.org/10.1177/0007650305281939

McGuire, J. B., Sundgren, A., & Schneeweis, T. (1988). Corporate social responsibility and firm financial performance. Academy of Management Journal, 31(4), 854–872. https://doi.org/10.2307/256342

Ng, A., Yuce, A., & Chen, E. (2009). Determinants of state equity ownership, and its effect on value/ performance: China’s privatized firms. Pacific-Basin Finance Journal, 17(4), 413–443. https://doi.org/10.1016/j.pacfin.2008.10.003

Peloza, J., & Papania, L. (2008). The missing link between corporate social responsibility and financial performance: Stakeholder salience and identification. Corporate Reputation Review, 11(2), 169–181. https://doi.org/10.1057/crr.2008.13

Portney, P. R. (2008). The (not so) new corporate social responsibility: An empirical perspective. Review of Environmental Economics and Policy, 2(2), 261–275.
https://doi.org/10.1093/reep/ren003

Reimsbach, D., Braam, G., & Wang, Z. (2018). Political embeddedness and the diffusion of corporate social responsibility practices in China: A trade-off between financial and CSR performance? Journal of Cleaner Production, 198, 1185–1197. https://doi.org/10.1016/j.jclepro.2018.07.116

Reitzig, M., & Wagner, S. (2010). The hidden costs of outsourcing: Evidence from patent data. Strategic Management Journal, 31(11), 1183–1201. https://doi.org/10.1002/smj.852

Rhou, Y., & Singal, M. (2020). A review of the business case for CSR in the hospitality industry. International Journal of Hospitality Management, 84, 1023–1030. https://doi.org/10.1016/j.ijhm.2019.102330

Rhou, Y., Singal, M., & Koh, Y. (2016). CSR and financial performance: The role of CSR awareness in the restaurant industry. International Journal of Hospitality Management, 57, 30–39. https://doi.org/10.1016/j.ijhm.2016.05.007

Roberts, R. W. (1992). Determinants of corporate social responsibility disclosure: An application of stakeholder theory. Accounting, Organizations and Society, 17(6), 595–612. https://doi.org/10.1016/0361-3682(92)90015-K

Schwartz, M. S., & Carroll, A. B. (2003). Corporate Social Responsibility: A three-domain approach. Business Ethics Quarterly, 13(4), 503–530. https://doi.org/10.5840/beq200313435

Semenova, N., & Hassel, L. G. (2008). Industry risk moderates the relation between environmental and financial performance. Sustainable Investment Research Platform Working Papers, 08–02.

Shenzhen GTA Education Technology (2000). Company Profile. http://en.gtafe.com/14-7-173.html

Sroufe, R., & Gopalakrishna-Remani, V. (2018). Management, Social sustainability, reputation, and financial performance relationships: An empirical examination of US firms. Organization & Environment, 32(3), 331–362. https://doi.org/10.1177/1086026618756611

Surroca, J., Tribó, J. A., & Waddock, S. (2010). Corporate responsibility and financial performance: The role of intangible resources. Strategic Management Journal, 31(5), 463–490. https://doi.org/10.1002/smj.820

Tabachnick, B. G., Fidell, L. S., & Ullman, J. B. (2007). Using multivariate statistics. Pearson.

Tippayawong, K., Tiwaratreewit, T., & Sopadang, A. (2015). Positive influence of green supply chain operations on Thai electronic firms’ financial performance. Procedia Engineering, 118, 683–690. https://doi.org/10.1016/j.proeng.2015.08.503

Torugsa, N. A., O’Donohue, W., & Hecker, R. (2012). Capabilities, proactive CSR and financial performance in SMEs: Empirical evidence from an Australian manufacturing industry sector. Journal of Business Ethics, 109(4), 483–500. https://doi.org/10.1007/s10551-011-1141-1

Turban, D. B., & Greening, D. W. (1997). Corporate social performance and organizational attractiveness to prospective employees. Academy of Management Journal, 40(3), 658–672. https://doi.org/10.2307/257057

Waddock, S. A., & Graves, S. B. (1997). The corporate social performance–financial performance link. Strategic Management Journal, 18(4), 303–319. https://doi.org/10.1002/(SICI)1097-0266(199704)18:4<303::AID-SMJ869>3.0.CO;2-G

Wang, H., Choi, J., & Li, J. (2008). Too little or too much? Untangling the relationship between corporate philanthropy and firm financial performance. Organization Science, 19(1), 143–159. https://doi.org/10.1287/orsc.1070.0271

Wang, H., & Qian, C. (2011). Corporate philanthropy and corporate financial performance: The roles of stakeholder response and political access. Academy of Management Journal, 54(6), 1159–1181. https://doi.org/10.5465/amj.2009.0548

Wei, J., & Li, R. (2003). Chinese corporate culture, Confucianism, Taoism and Buddhism. Chinese and Foreign Management, 3, 36–38.

Wen, S. B., & Fang, Y. (2008). Empirical study on the relationship between corporate social responsibility and financial performance – analysis on panel data from stakeholder perspective. China Industrial Economics, 10, 150–159.

Xu, B., & Zeng, T. (2016). Profitability, state ownership, tax reporting and corporate social responsibility: Evidence from Chinese listed firms. Social Responsibility Journal, 12(1), 23–31. https://doi.org/10.1108/SRJ-06-2014-0076

Yang, X. (2011). Family businesses make up 85.4% of private sector. Retrieved 02 March, 2020 from http://www.china.org.cn/learning_english/2011-12/13/content_24142565.htm

Yin, J. (2017). Institutional drivers for corporate social responsibility in an emerging economy: A mixed-method study of Chinese business executives. Business & Society, 56(5), 672–704. https://doi.org/10.1177/0007650315592856

Yin, J., & Zhang, Y. (2012). Institutional dynamics and corporate social responsibility (CSR) in an emerging country context: Evidence from China. Journal of Business Ethics, 111(2), 301–316. https://doi.org/10.1007/s10551-012-1243-4

Zhao, M. (2012). CSR-based political legitimacy strategy: Managing the state by doing good in China and Russia. Journal of Business Ethics, 111(4), 439–460. https://doi.org/10.1007/s10551-012-1209-6