CSR gap and firm performance: An organizational justice perspective

Abstract

A firm’s internal and external stakeholders may have conflicting demands on the firm’s corporate social responsibility (CSR) investments. Based on the organizational justice perspective, this study examined the impact of the gap between external and internal CSR investments on firm performance. A panel sample of 3,302 firms and 21,031 firm-year observations from China over the 2010–2019 period was employed. The results empirically supported the negative impacts of the CSR gap on financial and operational performance. In addition, this study found that CSR disclosure strengthened the negative impacts, while the Employee Stock Ownership Plan weakened the impacts. This research also provided empirical evidence of the link between CSR and firm performance by considering the competing relationship between internal and external CSR investments and employees’ perceptions. The findings suggested that managers adopt a more productive CSR strategy based on a careful consideration of different CSR dimensions.