The evolution of corporate social responsibility in China: Do political connection and ownership matter?

Abstract

The rising CSR awareness globally has influence CSR development in China but unlike anywhere in the world, the central government is always the main driver of CSR here, making it a unique case study. Under this political state, this study examines how a firm's political connections and foreign ownership affects its CSR reporting. We study a long sample over 4 different stages of CSR development in China between 2006 and 2019 with panel regression analysis. Our results show that CSR reporting and participation have increased over the sample period, but firms with political connection and foreign ownership are associated with lower levels of CSR reporting. The findings contradict theories of political cost theory that fit well in other countries. We propose crony relationship to explain the phenomena of low CSR compliance in the political linked firms in China. We further study Xi Jinping (XJP) regime and find that CSR reporting in China improved significantly in this regime but XJP regime moderates the state and foreign owned firms differently. Under XJP government, crony relationship has reduced following improved CSR reporting in politically connected firms, but CSR score has declined in foreign owned firms, implying they have become more opportunistic in cutting business cost and seeking profit.