Measuring CSR by Aim, Approach, and Action: Impact on Accounting and Market Performance in China

Abstract

We adopt a new model called SDV (Sustainable Development Value), built upon 3A (Aim, Approach, and Action) as a strategic management process to measure CSR. We explore the CSR-CFP relationship by distinguishing accounting performance (return on assets) and market performance (risk-adjusted return on stock). Regression results from 1,245 observations of large listed companies in China from 2014 - 2019 prove that SDV has a significant positive relationship with accounting performance but no significant relationship with market performance when controlling for factors like company size and industry. However, if we divide SDV into three groups of 415 (with low, middle and high SDV), the t-test demonstrates the high SDV group has the highest market performance. The contradictory results indicate different mechanisms of CSR-CFP relationship with regards to accounting and market performance, which are further explained by the 3A model.