Corporate Social Performance Research Articles

Real Earnings Management and ESG Performance in China: The Mediating Role of Corporate Innovations

ABSTRACTThis study addresses whether the positive consequences of corporate innovation can mitigate the negative repercussions of earning management practices on corporate sustainability. Specifically, it investigates the impact of real earning management (REM) practices on corporate environmental, social and governance (ESG) performance. Likewise, it explores the mediating role of corporate innovation inputs and outputs in this relationship. The study uses a sample of the A‐share listed firms in the Chinese stock market from 2011 to 2021. We measure REM activities as a comprehensive index of corporate abnormal cash flows, abnormal production costs and abnormal discretionary expenses. The Chinese firms' ESG performance is based on Huazheng's ESG rating. Corporate innovation is categorised into innovation input (i.e., R&D expenditure) and innovation output (i.e., patent applications). The study finds that REM practices inversely affect corporate ESG performance and its various pillars. Likewise, firms that engage in higher REM practices are less likely to allocate resources to innovation (i.e., lower R&D expenditure) and have a low innovation output (i.e., fewer patent applications). Nevertheless, firms with higher innovation input and/or higher innovation output exhibit higher ESG performance. Finally, the corporate innovation input and output mediate the relationship between REM practices and ESG performance, suggesting that the positive influence of innovation on ESG performance helps to mitigate the negative consequences of earnings management practices. These results underscore the significance of ethical financial practices and innovation‐driven strategies in enhancing corporate ESG performance.

Beacons not burdens: Business groups and corporate social performance around the world

AbstractResearch SummaryPrior studies on business groups (BGs) have predominantly focused on the impact of group affiliation on financial performance. In contrast, we argue that BG affiliates will outperform standalone firms in terms of corporate social performance (CSP) and that this effect will be positively moderated by the strength of formal and informal institutions. Moreover, we examine also differences among BGs and hypothesize that diversification and hierarchy of the group will negatively affect the CSP of affiliates. Employing a panel of 4368 firms from 43 countries between 2003 and 2016 and a propensity score matching approach in our regressions, we find robust support for these predictions. Our findings advance two distinct strands of literature on BGs and, respectively, corporate social responsibility.Managerial SummaryBG are a common organizational structure in many countries. Despite this, we still do not know much about them beyond their financial performance. In this study, we focus on examining the impact of BG affiliation on non‐financial performance (i.e., CSP) in the light of growing societal grand challenges. Using an international dataset of several thousands of firms, we find out that BG affiliates exhibit superior CSP results compared to non‐affiliated firms. These positive effects of affiliation are increased in environments with strong formal and informal institutions but reduced within groups that are more diversified and hierarchical. Our findings showcase the importance of BGs in tackling some of today's grand challenges and provide support for more nuanced approaches to study BGs across countries.

Revisiting tokenism: impact of gender diversity on corporate social performance of Indian companies

PurposeThis study aims to examine the relationship between corporate governance, in particular board diversity, and corporate social performance (CSP) amongst the top 500 listed companies in India.Design/methodology/approachData from the top 500 listed Indian companies constituting the BSE500 index for a five-year period from 1 April 2014 to 31 March 2019 are used to test the impact of the proportion of women directors, proportion of women independent directors, female CEOs and other corporate governance variables on CSP.FindingsThe results of panel regression analysis suggest that firms characterised by high proportions of women directors, independent women directors or a female CEO spend more on corporate social responsibility (CSR) activities. Furthermore, CEO duality, board size and board independence are positively related to social performance. These findings are of relevance to the policymakers and board of directors who are engaged in meeting corporate governance requirements.Practical implicationsThis is one of the initial studies to document the impact of executive-level female representation on CSP following India's 2013 regulations on mandatory women representation on boards and CSR expenditure. The study reveals that greater gender diversity on corporate boards significantly boosts CSP, offering strategic advantages in governance and CSR. The study offers practical benefits for various stakeholders including corporate regulators, policymakers and corporate managers.Originality/valueThe paper contributes to the corporate governance and CSR literature by showing that good governance practices and high women representation on boards promote social performance. Our study is one of the preliminary efforts to document the level and impact of female representation at the executive level on CSP after the regulation of minimum women representation on corporate boards and mandatory CSR expenditure requirement introduced in India in 2013.

ENHANCING BUSINESS SUSTAINABILITY THROUGH CSR: A CASE STUDY OF "BETTER LIVING IN MALAHING” IN THE PERSPECTIVE OF CARROLL'S PYRAMID

This study examines PT PKT's CSR initiative, "Better Living in Malahing," in relation to business sustainability and its alignment with the Sustainable Development Goals (SDGs). The research underscores the critical role of economic responsibility and profitability in sustaining both social and environmental goals. Using a qualitative case study approach, the study delves into the implementation of the CSR program based on Carroll's Pyramid of responsibilities, encompassing economic, legal, ethical, and philanthropic dimensions. Data collection methods include in-depth interviews, observations, and document analysis. Findings reveal that the program significantly improved the quality of life for coastal communities in Bontang while simultaneously bolstering the company's reputation. Moreover, a strong correlation between corporate social responsibility and sustainable financial performance is identified. The conclusion emphasizes that integrating CSR into core business strategies is crucial for long-term sustainability. This research contributes by illustrating the necessity of well-structured, enduring CSR initiatives in supporting economic, social, and environmental dimensions of corporate operations.

Green human resource management and corporate social responsibility as drivers of organizational performance: mediating effects of employee engagement and corporate reputation in Vietnam

Purpose This study aims to investigate the relationship between green human resource management (GHRM), corporate social responsibility (CSR) and organizational performance (OP) of small- and medium-sized enterprises (SMEs) by examining corporate reputation (CR) and employee engagement (EE) as mediators in Vietnam. Design/methodology/approach This study used the quantitative method with 458 valid responses from mid- to senior-level managers and chief executive officers (CEOs) were obtained and used for data analysis. To analyze and explore the relationships between constructs and mediators, SmartPLS version 4.0 structural equation modeling was used to analyze the data of the SMEs of Vietnam in 2023. Findings The results showed strong and positive relationships between GHRM, CSR and OP in SMEs, with CR and EE serving as significant mediators. Originality/value This research provides new insights into how GHRM and CSR enhance OP by using an integrated model that examines how CR and EE mediate this relationship. It demonstrates that businesses implementing GHRM and CSR can promote sustainable development among stakeholders, leading to improved OP in Vietnam’s dynamic economic environment. The findings have practical implications for executives and managers, emphasizing the need to balance stakeholder, environmental and social interests to optimize GHRM and CSR initiatives and foster sustainable growth. This study’s insights could significantly influence SMEs in the Vietnamese economy.

Gender diversity in top management team and corporate social responsibility performance: examining the moderating nature of TMT international experience

Purpose This study is based on the role congruity theory that examines the association between top management team (TMT) gender diversity and corporate social responsibility (CSR) performance. Design/methodology/approach This study uses data from the Taiwan Economic Journal database and the Market Observation Post System provided by the Taiwan Stock Exchange. The sample consists of 4,140 annual observations of Taiwanese-listed companies in the electronics industry from 2016–2020. Findings The results revealed that TMT gender diversity is positively associated with CSR performance, and TMT international experience strengthens the positive association between TMT gender diversity and CSR performance. Practical implications CSR is imperative. The TMT’s gender diversity aligns with current environmental trends and social expectations, driven for CSR implementation essential. This diverse configuration enables the TMTs to address corporate adaptability and maintain global competitiveness. Originality/value The findings contribute significantly to the literature on TMT gender diversity by extending the application of role congruity theory beyond individual to team-level contexts and across gender boundaries. By incorporating diverse capabilities such as international experience within TMTs, the authors identify key boundary conditions that foster CSR. This expansion not only aligns with practical realities but also opens new avenues for research into the dynamics of diverse management teams.

Corporate social performance through instrumental stakeholder theory: a sector-specific perspective

PurposeThis study uses instrumental stakeholder theory to explore the relationship between corporate social performance (CSP) and financial performance in various market sectors. It aims to show how CSP, driven by stakeholder demands in different markets, affects financial outcomes.Design/methodology/approachUsing panel data analysis on data from 2007 to 2020, this research examines how stakeholder demand impacts a firm's ability to turn social performance into financial gains. The study ensures reliable results by addressing methodological and endogeneity issues related to CSP.FindingsThe results show that a firm's success in converting social performance into financial benefits depends on stakeholder demands in different markets. While better CSP generally leads to improved financial performance, the extent of this benefit varies based on stakeholder expectations. This highlights the importance of managers strategically addressing stakeholder demands to maximize financial returns from social initiatives.Originality/valueBy examining the CSP–financial performance link through the lens of market and stakeholder demands, this research provides new insights into how firms can strategically gain stakeholder support for financial benefits. It shows the long-term value of CSP as an investment that gains stakeholder support over time. This approach broadens the understanding of CSP by considering diverse stakeholder influences across industries, filling a gap in long-term CSP research.

Can the Inclusiveness of Foreign Capital Improve Corporate Environmental, Social, and Governance (ESG) Performance? Evidence from China

Foreign direct investment (FDI) has become an important factor influencing corporate operational strategies, yet the impact of its inclusiveness on corporate environmental, social, and governance (ESG) performance remains unclear. In this study, the correlation of city-level FDI inclusiveness with corporate-level ESG performance was investigated based on data from 1258 Chinese A-share listed companies between 2011 and 2021. The effects of FDI inclusiveness on corporate ESG performance and its underlying mechanisms were investigated. The findings indicate that an increase in FDI inclusiveness significantly improves corporate ESG performance. Additionally, the moderating role of corporate competitive advantage and urban entrepreneurial vitality was analyzed, and the findings indicate that an increase in urban FDI inclusiveness significantly improves corporate ESG performance. Managerial green attention and corporate innovation capability play intermediary roles in the overall impact, with the total impact being positively moderated by investor attention. Furthermore, the influence of FDI inclusiveness on corporate ESG performance exhibits significant heterogeneity resulting from variations in digital policies, environmental policies, and ownership structures.

Strategic nature of corporate social responsibility, competitive performance, innovation capability and environmental uncertainty

PurposeThe goal of this work is to evaluate how corporate social responsibility (CSR) affects competitive performance in Nigeria's banking industry, with innovation capability acting as a mediator and environmental uncertainty as a moderating factor.Design/methodology/approachThe banking industry in Nigeria served as the site for the empirical investigation. Employees at deposit money institutions received a questionnaire. Direct and mediating effects and the moderating role were thus examined utilizing a final sample of 267 cases using consistent partial least squares structural equation modeling with ADANCO 2.2.1.FindingsThe data shows that CSR has both a significant strategic impact on innovation capability and a competitive innovation capability. In contrast, the outcome shows a strong effect of CSR's strategic character on performance in the marketplace. Furthermore, evidence for mediating and moderating effects was provided.Research limitations/implicationsThe study was restricted to Nigerian banking institutions. Additionally, data on competitive performance were acquired from employees' perspectives, while considering the competitive performance of their rivals.Originality/valueThe primary contribution of this paper is the empirical investigation of the mediating impact of innovation capability and the moderating function of environmental uncertainty in banking organizations that use a CSR strategy to attain competitive performance.

The Spillover Effect of Constituency Statutes Along Supply Chains: Evidence From Supplier Commitment

This study examines the spillover effect of constituency statutes along the supply chain. We posit that the enactment of constituency statutes in customer firms’ incorporation states, by removing legal obstacles for customer firms to cater to non-shareholders’ interests, builds suppliers’ trust and cooperation. Consistent with the notion that constituency statutes entice greater trust from suppliers, we find that suppliers make more relationship-specific investments in the supply chain after the enactment of constituency statutes in customers’ states, indicating a greater commitment to the customer. We also show an improvement in customers’ corporate social responsibility performance in the post-constituency-statute period, thus substantiating the claim that the constituency statutes increase customers’ stakeholder orientation. Cross-sectionally, we find the positive effect of constituency statutes on supplier relationship-specific investments is attenuated if the customer and supplier have more repeated interactions in the past, whereas the effect is more pronounced if suppliers produce durable goods. Overall, we provide novel evidence on the spillover of constituency statutes along the supply chain.

The impact of firm-level political risk on ESG practices: Does CEO Duality Matter?

Although prior studies have probed the determinants of corporate environmental, social, and governance (ESG) performance, limited works have deeply explored the role of firm-level political risk (PRISK) in determining ESG ratings and the moderator role of ownership structure on the PRISK–ESG performance nexus. Thus, this work endeavors to fill the gap by probing the impact of PRISK on aggregate corporate ESG performance and its pillars, namely environmental, social, and governance. In particular, the present study explores whether chief executive officer (CEO) duality has a moderating role between PRISK and ESG performance. Our sample focuses on 350 listed nonfinancial companies operating in the Standard and Poor's 500 index and performing both Tobit and Poisson panel data estimation methods between 2005 and 2022. Remarkably, we found that PRISK positively affects corporate ESG performance, supporting legitimacy theory. This indicates that a firm with higher political risk exposure prefers to engage more in ESG activities to gain legitimacy, increase its reputation, and achieve corporate success. Furthermore, the findings underscore that an increase in the level of CEO duality leads to a decrease in the positive effect of PRISK on ESG. The findings are robust after considering the various modifications that suggest significant policy implications for corporate executives and policymakers.

Gender diversity and corporate social responsibility performance: A critical assessment

AbstractPrevious research predominantly used quantitative data to examine the relationship between female representation and corporate social responsibility (CSR) performance. Little is known as to how female leaders drive CSR changes in practice. This study explores the complexities and paradoxes of gender roles in CSR engagement based on 20 in‐depth interviews with female leaders. We find that although gender traits from social roles are relevant, women leaders face considerable challenges in navigating the power dynamics prevalent in boardrooms when driving CSR initiatives. The pronounced power imbalance compels them to reframe CSR within the dominant board discourse and mobilise rhetorical and narrative strategies to acquire authority and alter power dynamics within board CSR decisions.

Climate risk perception and corporate ESG performance: evidence from China

PurposeThis study examines the impact of climate risk perception on corporate environmental, social and governance (ESG) performance from a microfirm perspective.Design/methodology/approachUsing a sample of Chinese listed companies from 2009 to 2021, we constructed corporate climate risk perception indicators based on the Management Discussion and Analysis (MD&A) in the annual reports of the companies, and analyzed it using ordinary least squares regression.FindingsThe results show that climate risk perception improves corporate ESG performance by encouraging green innovation. Heterogeneity analysis suggests that the greater the magnitude of climate risk shocks to the firms, the stronger the risk coping ability and the weaker the environmental regulation, the more pronounced the improvement of climate risk perception on corporate ESG performance. Furthermore, economic consequence analysis shows that the enhancement effect of climate risk perception on corporate ESG performance contributes to increasing corporate value.Originality/valueThis study emphasizes the significance of corporate climate risk perception in enhancing ESG performance. It provides a theoretical basis for enterprises to respond to climate risk and sustainable development.

Green Technology Innovations and Corporate Customer Concentration—The Perspectives of Financing Constraints and Social Responsibility

Green technology innovations propel both economic development and environmental sustainability. Exploring the contributing factors to green technology innovations carries important policy implications, but research from the perspective of supply chain relationships has been rare. This paper examines the impact of corporate customer concentration on green technology innovations and explores its influencing mechanisms using the data of Chinese A-share listed companies. The results show that a high customer concentration inhibits the quantity and quality of green technology innovations, a finding that is robust when endogeneity is addressed and when alternative measures and an alternative estimation model are employed. Financing constraints and social responsibility play intermediary roles in the impact of customer concentration on green technology innovations. A high customer concentration tends to increase corporate financing constraints and reduce corporate social responsibility performance, which hinder green technology innovations. The heterogeneity analysis reveals that the inhibitory effect of customer concentration on green technology innovations is less severe in digitally transformed enterprises, mature enterprises, or enterprises with a high level of market power. As this study provides a novel perspective on the contributing factors to corporate green innovations, it offers important policy recommendations.

Corporate sustainability reporting and financial performance of likelihood distress companies in Nigeria

This study explored the interplay between corporate sustainability reporting and the financial performance of likelihood distressed listed companies in Nigeria. This study employed an ex-post facto research design spanning a longitudinal period of five years (2018–2022). The sample size comprises one hundred and nineteen firms listed on the Nigerian Exchange Group (NGX), formally known as the Nigeria Stock Exchange (NSE). The study data were analysed using the random effect panel regression technique based on the outcome of the Hausman selection test. The study’s result indicated that both corporate social responsibility and economic performance exhibited a significant and positive relationship with the performance of the likelihood distressed companies implying an increase in corporate financial performance based on data extracted from the audited annual reports of the sampled firm. Surprisingly, environmental performance reporting demonstrated a negative and non-significant relationship with financial performance. Corporate governance practice displayed a positive but non-significant relationship with financial performance. Therefore, this study recommends that the management of the sampled companies should improve social responsibility and economic disclosures as they positively affect corporate financial performance. It is also recommended that companies disclose only material information especially concerning environmental sustainability performance to improve corporate financial performance.

Seeing is believing: Do face‐to‐face meetings between independent directors and investors enhance corporate ESG performance?

AbstractThis article explores the topic of whether face‐to‐face communication between independent directors and investors can help them obtain firm‐specific information and promote management to improve corporate environmental, social, and governance (ESG) performance. Our findings revealed a notable positive correlation between the frequency of independent directors attending shareholder meetings (IDASM) and ESG performance. The underlying mechanism for this correlation is that IDASM increases investment in research and development (R&D) and green patent applications, which can drive long‐term firm value. Further analysis reveals that independent directors attending annual shareholder meetings can more effectively enhance a company's ESG performance. Independent directors attending shareholder meetings also exhibits a more noticeable impact on improving corporate governance performance than environment performance and social performance. The effect becomes more pronounced when independent directors possess an accounting background, have shorter tenures, when the meetings attended by more minority shareholders, the degree of enterprise information asymmetry is high. The research results have reference significance for improve the information disadvantage position of independent directors, restrain short‐sighted behavior of management, and improving the role of shareholder meetings in protecting investor interests.

Can female CEOs improve corporate environmental, social and governance performance?

Purpose In the context of the severe global challenges posed by climate and environmental issues, this paper aims to explore the connection between female Chief Executive Officers (CEOs) and the level of sustainable development in companies. This study aims to investigate the impact of female CEOs on corporate ESG performance and provide a detailed analysis of the underlying mechanisms. Design/methodology/approach This study uses a sample of listed companies from 2010 to 2021, as reported by Bloomberg. This study uses logit regression models to test hypotheses and conduct robustness tests using the generalized method of moments, propensity score matching and heckman two statge tests. Findings The research findings indicate that female CEOs can enhance a company’s ESG performance, primarily by elevating the level of green innovation and engaging in more philanthropic activities. When environmental uncertainty is high, the risk-averse attitude of female CEOs may diminish the enhancement of ESG performance. However, granting a higher proportion of equity to female CEOs incentivizes risk-taking, thereby strengthening the improvement of ESG performance. Further analysis reveals that the impact of female CEOs on ESG performance is more significant in non-state-owned enterprises, high-pollution industries, and companies with low financing constraints. Research limitations/implications The authors have shown that two key ways in which female CEOs enhance a company’s ESG performance are by increasing the level of green innovation and assuming more social responsibility. Nonetheless, this remains a shortcoming of this work, opening a door for future research to examine and enrich. There may be other possible mechanisms explaining the influence of female CEOs on corporate ESG performance. More research is warranted about the CEO’s additional traits, which were not considered in this study but may have an impact on a company’s ESG performance. Finally, while the analysis has delved into the moderating effects of external factors such as environmental uncertainty and CEO ownership on the influence of female CEOs on corporate ESG performance, there is room for exploring whether other factors also play a moderating role in future studies. Practical implications First, the findings of this study highlight the beneficial societal and economic effects of choosing female CEOs. The inclination to take on social responsibility and care for the environment are both higher among female CEOs. Furthermore, the authors have also discovered that female CEOs possess unique advantages in promoting corporate sustainability and enhancing ESG standards. This can contribute to breaking down stereotypes about gender roles in the workplace. Finally, this research shows that organizational heterogeneity and market risks have an impact on female CEOs’ capacity to improve company ESG performance. Originality/value A significant innovation of this paper lies in its unique focus on the connection between female CEOs and corporate ESG performance, along with the underlying mechanisms. Against the backdrop of sustainable development, the paper integrates social gender theory, upper echelon theory and agency theory into a comprehensive framework, shedding light on the influence of female CEOs on ESG performance and the associated mechanisms.

Corporate Social Responsibility and SMEs’ Performance: Mediating Role of Sustainable Competitive Advantage

The main objective of this study was to examine the mediating effect of a sustainable competitive advantage on the relationship between corporate social responsibility (CSR) and organizational performance among Thai SMEs. A questionnaire survey was used to gather data from 336 small and medium-sized enterprises (SMEs) in Thailand. Investigation of the resulting data demonstrated that participating in CSR initiatives enhances the sustainable competitive advantage and organizational performance of Thai SMEs. Moreover, a sustainable competitive advantage was found to serve as a partial mediator between CSR and organizational performance. This research uses stakeholder theory and the resource-based view theory to explain the link between CSR and organizational success. A competitive advantage significantly influences both strategic management and organizational performance. CSR is a process of transforming a company’s sustainable initiatives into sustainable competitive advantages that impact the organization’s performance.

Corporate ESG performance and credit misallocation: Evidence from China

Using data from Chinese-listed companies from 2010 to 2020, this paper investigates the impact of corporate environmental, social, and governance (ESG) performance on credit misallocation. We find that ESG performance significantly reduces credit misallocation, which remains robust to various sensitivity tests. Mechanism analysis reveals that ESG reduces credit misallocation by alleviating information asymmetry. This “information supplementary effect” is primarily evident at the firm rather than the macro level. Further discussion reveals a more pronounced impact of ESG in firms with lower profitability and higher market competition, as well as those located in less financially developed regions. However, this impact becomes less salient during periods of credit expansion. Our research highlights the importance of corporate ESG performance in deterring information asymmetry, and provides insights into improving the resource allocation efficiency in the credit market.

The Effects of IT Management Certification Type and Corporate Social Responsibility Performance on Investors’ Responses to Cybersecurity Breaches

ABSTRACT We investigate the joint effects of IT management certification type (for example, International Organization for Standardization (ISO) 27001 certification, the certification of a company’s Information Security Management System against the ISO 27001 standard, the leading international standard focused on information security) and CSR performance on investors’ responses to cybersecurity breaches. We find that the ISO 27001 certificate issued by an independent certification body serves as a proactive remedial strategy for reputation management and attenuates investors’ negative reactions following data breaches. However, the connection between the certification body that issues the certificate and the financial audit firm of the audited company may impair the effectiveness of the certificate serving as a remedial strategy for cybersecurity breaches. Similarly, superior CSR performance provides insurance-like protection and spillovers to reduce investors’ negative responses to cybersecurity breaches. We also provide some evidence suggesting that IT management certification type and CSR performance are likely substitutive mechanisms.