Abstract
Chinese merchant groups are commercial organizations that have developed over thousands of years. Given the importance of private firms to China’s sustainable development, this study investigates the impact of the traditional Chinese concept of merchant groups on corporate social responsibility (CSR) performance and cost of debt, using Chinese private listed firms during 2008–2020. We measure merchant group culture based on the company’s geographic location. Ordinary least squares regression models are used to test the hypotheses. According to the results, the CSR performance of firms from five traditional Chinese merchant groups is better than non-members. A positive relationship exists between the strength of merchant group culture and CSR performance; this relationship is stronger among merchant group companies. The closer the culture to CSR values, the better the CSR performance, which is negatively related to the cost of debt. The findings are in line with the peer effect theory. Therefore, the study provides evidence that it is essential to consider the traditional Chinese merchant group culture for firms’ CSR strategies beyond formal financial and regulatory factors in China. This study is a first step in exploring the impact of merchant group culture in China on CSR performance and the economic application of this relationship.
Highlights
Prior studies on law and finance by Andrei and Robert [1] and La Porta et al [2] have mainly focused on developed countries, using a Western-centric approach to property rights to develop legal systems, thereby giving legal protections to investors
This study shows that the corporate social responsibility (CSR) performance of Chinese private listed firms is associated with exogenous informal institutions, such as merchant group culture, affecting the philosophy and attitudes of firm management strategy as a key factor
Using a comprehensive sample of publicly traded private firms in the Chinese market, we have provided new empirical findings that the CSR performance hinges on the idiosyncratic merchant group culture
Summary
Prior studies on law and finance by Andrei and Robert [1] and La Porta et al [2] have mainly focused on developed countries, using a Western-centric approach to property rights to develop legal systems, thereby giving legal protections to investors. The Chinese merchant group is a commercial organization that has developed over thousands of years. Given the ongoing deterioration of the natural environment caused by human industrial civilization and the internationalization of enterprise management, sustainable development is garnering increasing attention. In this context, the present study addresses the following questions. This study makes the following contributions to the literature It sheds light on the impact of merchant group culture on CSR. To the best of our knowledge, this study is the first to analyze the impact of CSR performance on the cost of debt of private listed firms in China using the merchant group culture.
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