The relationship between CSR and financial performance and the moderating effect of ownership structure: Evidence from Chinese heavily polluting listed enterprises

Abstract

Corporate social responsibility (CSR) contributions are essential for the firm's profit considering sustainable economic growth, whereas it also imposes additional financial burdens for many firms. This paper utilizes the sample data of 6306 Chinese heavily polluting listed companies from 2012 to 2019 to investigate the impact of heavily polluting enterprises’ CSR on corporate financial performance (CFP). In addition, ownership structure is divided into ownership concentration, ownership balance and ownership type to explore its moderating impact on CSR and CFP. An ordinary least squares (OLS) regression model is applied to test the four proposed hypotheses, and two-stage least squares method (2SLS) and propensity score matching-difference in differences method (PSM-DID) are adopted to the endogenous test. It is observed that CSR can have a positive impact on CFP in Chinese heavily polluting listed companies. However, ownership concentration will reduce this positive impact, conversely, ownership balance can promote the positive effect of CSR on CFP. CSR promotes CFP better in non-state-owned enterprises (non-SOEs) compared with state-owned enterprises (SOEs). Additionally, heterogeneity tests are conducted and found that the promoting effect of CSR on CFP is affected by the region, and the promotion effect in Middle and Western China is greater than that of Eastern China. The effect is similar for both technology-capital-intensive enterprises and labor-resource-intensive enterprises. These conclusions provide theoretical and practical reference values for CSR management practices and the improvement of CFP. Enterprises should actively undertake CSR and optimize their ownership structure to promote better CFP.