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Corporate social responsibility reporting and firm performance: evidence from China

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Abstract

A series of product safety and child labor scandals in the mid-2000s aroused global concerns over business ethics and corporate social responsibility (CSR) in China. The general public expects companies to be socially responsible and to look beyond the maximizing of profits. In this study, we examine the relationship between the issuance of CSR reports and performance, in terms of accounting income, market return, and growth by firms listed in China in 2008–2009. We find that the historical performance of firms has significant and positive effects on the issuance of standalone CSR reports. There is also a positive correlation between current CSR disclosures and subsequent performance. Finally, we find that corporate donations are positively associated with improved performance in the following year. Our results support the view that CSR is a useful business strategy even in a developing country such as China. We call for government authorities in emerging markets to advocate CSR practices and for the market participants to change their perception of and attitude towards CSR.

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Notes

  1. For example, 81 % of European, Japanese, and Australian firms and 40 % of American firms produced a CSR report in 2010, an increase of more than 60 % over 2008 in all four regions (Craib and PwC 2010).

  2. The CSR index is developed in accordance with the third OECD Corporate Governance Principle (OECD 2004), which addresses the role of stakeholders in corporate governance and is related to the CSR of a company. The index is a measure of employee benefits, long-term employee incentive plans, staff development policy, employee safety, the firm’s policies on recruitment, environmental issues, philanthropy, and relationships with other stakeholders.

  3. Companies traded on the Shenzhen Stock Exchange are not considered in this study, as the different regulatory rules and CSR guidelines of the two exchanges are not comparable in during the investigation period.

  4. In developed countries, CSR reports are usually classified as environmental reports, social reports, and sustainability reports. However, classification of CSR reports by function is less clear in China. Though the contents of most CSR reports are similar, management arbitrarily names these reports as corporate social responsibilities reports, sustainability reports, or corporate citizenship reports (China Sustainability Reporting Resource Center 2010).

  5. The website is maintained by the Center for Environmental Education and Communications (CEEC) of the State Environmental Protection Administration (SEPA) of China and Syn Tao. The former is a government agency that promotes environmental publicity and the latter a consulting company that cooperates with the Global Reporting Initiative (GRI) to promote CSR in China.

  6. The commonly used frameworks are AA1000, the Global Compact Advanced Level COP (GC COP), and the Global Reporting Initiative (GRI) guidelines. We chose the GRI framework, as it is an official collaborating center of the United Nations Environment Program, and has worked in co-operation with the Global Compact since 1997. The GRI framework helps firms prepare CSR reports with comparability, accuracy, timeliness, reliability, and clarity (GRI 2006). It not only provides standardized measures of performance for environmental, social, and economic impacts (Adams 2004), but also includes some of the principles or characteristics of AA1000 (Reynolds and Yuthas 2008). The GRI is the framework most widely used to support firms in their sustainability reporting (Menichini and Rosati 2014).

  7. We also examine the effects of contemporaneous corporate actions on firm performance, and find a weak contemporaneous effect.

  8. Having agreed on the proxies for the CSR actions, one of the authors (coder) manually searched the CSR reports with words such as “charity”, “donation”, “gift”, “contribution”, “award” and “honour” in sections related to social public welfare and undertakings and community recognitions for the sample firms. With a crosscheck by another coder, we identified a total of 102 (98) firms in 2008 and 88 (96) firms in 2009 that reported monetary donations (social responsibility awards) in a firm’s CSR reports. We added up the number of awards and amounts of monetary donations respectively for each firm year.

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Authors and Affiliations

  1. Department of Accountancy, Lingnan University, 8 Castle Peak Road, Tuen Mun, Hong Kong

    Suwina Cheng, Kenny Z. Lin & William Wong

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  1. Suwina Cheng
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Correspondence to Suwina Cheng.

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Cheng, S., Lin, K.Z. & Wong, W. Corporate social responsibility reporting and firm performance: evidence from China. J Manag Gov 20, 503–523 (2016). https://doi.org/10.1007/s10997-015-9309-1

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