Corporate social responsibility and firm performance: Modified social contribution value per share

Simon Man Shing So

doi:10.22495/rgcv11i2p3

Abstract

This study attempts to enhance the corporate social responsibility (CSR) performance measurement by introducing the concept of environmental contributions. As suggested by Xu and Zhu (2010), we modify the formula of social contribution value per share (SCVPS) developed by the Shanghai Stock Exchange (SSE) in 2008 by employing two environmental elements, namely, the audited environmental cost (AEC) and additional audited environmental cost (AddAEC). Using pooled least square regressions to examine the relationship between the two modified SCVPSs, under the accrual basis and the cash basis, and the performance of the listed firms in the SSE social responsibility index, we find that they have a positive relationship — a larger modified SCVPS corresponds to better CSR performance and firm performance. Our results for the two modified SCVPSs are relatively unaffected by the different ownership structures, state-owned (SO) and non-state-owned (NSO). Evidence also indicates that the influence on firm performance of the modified SCVPS under the accrual basis is more significant for SO firms than NSO firms. Companies are encouraged to increase their environmental contribution and SCVPS to go beyond the minimum environmental protection standards.

Highlights

As a shareholder agent, the main goal of company management is to maximize shareholder wealth, and shareholders generally regard corporate social responsibility (CSR) as an expense
Using pooled least square regressions to examine the relationship between the two modified social contribution value per share (SCVPS), under the accrual basis and the cash basis, and the performance of the listed firms in the Shanghai Stock Exchange (SSE) social responsibility index, we find that they have a positive relationship — a larger modified SCVPS corresponds to better CSR performance and firm performance
By comparing the components in the formula of the current SCVPS with the triple bottom line (TBL) framework, this study finds that the current SCVPS lacks the measurement of environmental contribution

Summary

Introduction

The main goal of company management is to maximize shareholder wealth, and shareholders generally regard corporate social responsibility (CSR) as an expense. The United States and developed countries in Europe have established some remarkable SPIs, such as the Domini 400 Social Index (Carini, Comincioli, Poddi, & Vergalli, 2017), the FTSE4Good Index (Carini et al, 2017; Gjølberg, 2009), the Dow Jones Sustainability Index (Gjølberg, 2009; López, Garcia, & Rodriguez, 2007), and the social return on investment (SROI) (Adam & Shavit, 2008; Brammer, Brooks, & Pavelin, 2006) These SPIs have their limitations; for example, third-party development of the Domini 400 Social Index and FTSE4Good Index, indicates a lack of transparency. While different accounting standards in developed and developing countries can make it difficult to implement these SPIs in the latter, SPIs are improving the awareness of sustainable development among researchers in developing countries

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