THE HETEROGENEOUS EFFECTS OF CSR DIMENSIONS ON FINANCIAL PERFORMANCE – A NEW APPROACH FOR CSR MEASUREMENT

Rongjia Su,Chunping Liu,Weili Teng

doi:10.3846/jbem.2020.12394

Abstract

This paper investigates the differential effects of corporate social responsibility (CSR) dimensions on corporate financial performance (CFP) across sectors in China. This research uses a unique data set provided by China Stock Market and Accounting Research (CSMAR), showing expenditure on CSR programs from 568 Chinese publicly traded firm-year observations from 2008 to 2017. Compared to previous studies using scores produced by extra-financial rating agencies, this research quantifies CSR efforts by corporate expenditure on CSR practices, which offers quantitative and precise information in explaining the CSR-CFP link. The results show that the dimension of the environment has negative effects on financial performance in capital-intensive manufacturing industries. The impact of HR expenditure on CFP is negative in the tertiary sector and resourceintensive manufacturing industries. However, CSR investments in the community are positively related to financial performance in resource-intensive industries and other secondary sector (mining, construction, and utilities). Firms, in general, could gain benefits when spending more on business and financial stakeholders.

Highlights

The issue whether corporate social responsibility (CSR) contributes to corporate financial performance (CFP) has great implications on CSR decision makings in a firm (Kao et al, 2018)
Based on prior research (Cavaco & Crifo, 2014; Forget, 2012; Girerd-Potin et al, 2014; Inoue & Lee, 2011), this paper proposes that CSR can be composed of four dimensions: (1) human resources, (2) community, (3) environment (4) business and financial stakeholders
Findings from this study show that CSR has a positive impact on CFP as a whole, which is consistent with the research done in developed countries

Summary

Introduction

The issue whether corporate social responsibility (CSR) contributes to corporate financial performance (CFP) has great implications on CSR decision makings in a firm (Kao et al, 2018). Cheung et al, 2012) Empirical research in this area mainly investigated developed countries (the United States and European countries) and usually revealed the positive link between CSR efforts and financial performance (Kao et al, 2018). Differences in the corporate environment and national environment make the concept of CSR highly contextual (Fukukawa & Moon, 2004; Maignan & Ralston, 2002) In emerging markets, such as China, CSR has attracted increasing interest from academics and the business community (Li & Zhang, 2010; Reimsbach et al, 2018). Findings can be relevant for firms in other emerging economies

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