Relationship between Corporate Social Responsibility and Financial Performance in the Mineral Industry: Evidence from Chinese Mineral Firms

Xiping Pan,Jinghua Sha,Wenlan Ke,Hongliang Zhang

doi:10.3390/su6074077

Abstract

This paper examines the relationship between Corporate Social Responsibility (CSR) and Corporate Financial Performance (CFP) using panel data for 228 Chinese mineral listed firms from 2010 to 2013 with Pooled Least Squares regression analysis. Our study considers five different sublevel CSR issues—shareholder responsibility, employee responsibility, environmental responsibility, public responsibility, and supplier, customer and consumer responsibility—in capturing the effects of CSR elements on CFP. The estimation results show the different effects of each sublevel CSR issue on CFP. Overall, shareholder, employee responsibility, environmental responsibility, supplier, customer and consumer responsibility have significant relationships with CFP, which are the stakeholders who have the closest linkage with firm operations. Meanwhile, public responsibility outside the firm does not show significant interaction with CFP, which is why many mineral firms ignore the public interest and this leads to conflicts. Shareholder responsibility has the most significant positive effect on CFP. Supplier, customer and consumer responsibility and environmental responsibility usually have negative effects on CFP as costs increase. Moreover, all 228 listed mineral firms that were selected in this paper have been classified into five sub-sectors: the extractive industry, metal fabrication industry, oil and gas industry, gas and water-related industry, and oil-producing equipment industry, based on the Industry Classification Benchmark (ICB). Our study shows that the differences in the relationship between CSR and CFP for five sublevel industries are due to industry characteristics. If the government wants to solve these conflicts and positively encourage firms to adopt CSR, it is necessary to create a mining development environment whereby firm profits are closely tied to CSR.

Highlights

The mineral industry experienced a huge boost over the last decade with mining output increasing5.6 times during the 2002–2011 period [1]
As our samples are extremely equal to all of the listed mineral companies in China and the data period is relatively short, the firms-fixed effects regression model was adopted in this research and we passed over the unit root test for the short term data
The results show that Corporate Social Responsibility (CSR) may have positive connections with firm profits

Summary

Introduction

5.6 times during the 2002–2011 period [1] Accompanying this rapid growth was a lack of Corporate Social Responsibility (CSR), the presence of externalities, and many social conflicts, such as environmental pollution, security issues, employment of local residents, and illegal land use. All of these conflicts are closely associated with stakeholder interests. The stakeholders of firms such as shareholders, employees, investors, governments, local communities, trading partners, consumers, and non-governmental organisations are conscious of their interests and corporate management This directly or indirectly influences a firm’s financial performance [2]. This phenomenon is common in the minerals sector of some natural resources-rich areas such as Ghana and sub-Saharan Africa where companies have little sense of who to target in their local economic development policies, and programs lead to conflicts and scrambles [3,4]

Objectives

Methods

Results

Conclusion