The Relationship between Corporate Social Responsibility Reporting and Firm Performance and the Moderating Role of Firm Life Cycle Stages: Evidence from China

Naveed Jan,Xiyu Liu,Zeyun Li,Arodh Lal Karn

doi:10.3390/su131810038

Abstract

This study aims to investigate the relationship of firm performance and corporate social responsibility reporting and the moderating role of a firm’s life cycle stages in Chinese listed companies. We used the sample of all A-share listed firms on the Shanghai and Shenzhen stock exchanges for the period 2010 to 2020. The authors used pooled ordinary least squares (OLS) regression as a baseline methodology. Our regression results show that positive Corporate social responsibility (CSR) activity significantly reduces the performance of the firm. In addition, the negative link between positive Corporate social responsibility and a firm’s performance is more pronounced for firms in mature life cycle stages. Our results are robust to alternative proxy measures of ROA for firm performance, corporate social responsibility reporting, and life cycle stages. To control the possible problem of endogeneity, we use a one-year lag and 2SLS least squares regression. We find that firm performance has a statistically significant influence on CSR reporting. Moreover, we see that firms with high performance are more likely to report CSR activities than low-performance firms. Additionally, six out of ten control variables (Independent Director, Board Shares, State Owned Enterprise, Board Meeting, Chief executive officer Duality, and Firm Growth) have positive influences on CSR reporting. These findings hold for a set of robustness tests. Our results have implications for the development of CSR reporting in developing countries such as China. Our research suggests that, in China, firms with better financial performance undertake more CSR reporting. This paper contributes to the existing literature by investigating the effect of firm performance on CSR reporting and the moderating role of a firm’s life cycle stages in Chinese listed companies. Additionally, this paper enriches the current literature on CSR reporting and highlights the importance of a firm’s financial performance for better environmental performance and reporting.

Highlights

Debate on the paradoxical nature of corporate social responsibility (CSR) is at its full swing in media, in academia, and amongst practitioners, and in last couple of decades, several researchers conducted research on CSR from various aspects [1,2,3,4,5,6,7]
We examined the influence of firm performance on corporate social responsibility (CSR) reporting through the lens of the life cycle theories, the stakeholder, and legitimacy theories, expanding on a previous study [20]
This paper examined the connection between the CSR Reporting and Firms Performance (FP)

Summary

Introduction

Debate on the paradoxical nature of corporate social responsibility (CSR) is at its full swing in media, in academia, and amongst practitioners, and in last couple of decades, several researchers conducted research on CSR from various aspects [1,2,3,4,5,6,7]. Though the common theme in all research conducted in the past is a link between CSR and firm financial outcome [9,10], a lot of studies have been conducted to prove or disapprove the link between CSR reporting and firm performance. In these studies, many researchers claimed to find a connection between CSR reporting and firm’s output [11,12] but the method in which CSR impacts the Sustainability 2021, 13, 10038. Some academics believe that CSR reporting is positively related to firm performance [13,14,15,16]

Objectives

Methods

Findings

Conclusion