Skip to main content
SpringerLink
Log in

Do Suppliers Applaud Corporate Social Performance?

  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

The influence of corporate social performance (CSP) on stakeholders is one of the focal issues in corporate social responsibility (CSR) research. Using data of listed companies in China, this paper examines whether CSR behavior in the form of charitable donations garners a positive reaction from suppliers. Results derived from both level and change model regressions show that superior CSP makes it easier for a firm to obtain trade credit from suppliers, although the effect is significant only in non-state-owned enterprises (non-SOEs). The results are robust to various measures of CSP and endogeneity tests. The results support the strategic philanthropy view and apply stakeholder theory in supply chain, that strategic CSR can help firms to attract suppliers and consolidate cooperative relationships with them, which in turn benefits the firms in terms of more trade credit financing from suppliers. This paper also shows that state-owned enterprises and non-SOEs have different CSR intentions and use CSR to achieve strategic goals in different ways. The conclusions drawn from this study provide practical guidance on CSR strategy, suggesting that CSR activities can help a firm in transition economies to enhance its corporate image, establish and consolidate the good relationship with suppliers, and obtain economic benefits or achieve long-term business objectives.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. “A New Era of Sustainability.” UN Global Compact-Accenture CEO Study (2010): http://www.accenture.com/us-en/Pages/insight-new-era-sustainability-summary.aspx.

  2. The China Securities Market and Accounting Research (CSMAR) database was developed by the Guo Tai An Company, and is widely used in Chinese finance and management research. The CSMAR database can be obtained from Wharton Research Data Services.

References

  • Allen, F., Qian, J., & Qian, M. J. (2005). Law, finance and economic growth in China. Journal of Financial Economics, 77, 57–116.

    Article  Google Scholar 

  • Angel, J. J., & Rivoli, P. (1997). Does ethical investing impose a cost upon the firm? A theoretical perspective. Journal of Investing, 6, 57–64.

    Article  Google Scholar 

  • Belal, A. (2001). A study of corporate social disclosures in Bangladesh. Managerial Auditing Journal, 16(5), 274–289.

    Article  Google Scholar 

  • Benabou, R., & Tirole, J. (2010). Individual and corporate social responsibility. Economica, 77(305), 1–19.

    Article  Google Scholar 

  • Bhattacharya, C. B., & Sen, S. (2001). Does doing good always lead to doing better? Consumer reactions to corporate social responsibility. Journal of Marketing Research, 28, 225–243.

    Google Scholar 

  • Botosan, C. A. (1997). Disclosure level and the cost of equity capital. The Accounting Review, 72(3), 323–349.

    Google Scholar 

  • Brammer, S., & Millington, A. (2005). Profit maximization vs. agency: An analysis of charitable giving by UK firms. Cambridge Journal of Economics, 29(4), 517–534.

    Article  Google Scholar 

  • Brammer, S., & Millington, A. (2008). Does it pay to be different? An analysis of the relationship between corporate social and financial performance. Strategic Management Journal, 29(12), 1325–1343.

    Article  Google Scholar 

  • Brown, W., Helland, E., & Smith, J. (2006). Corporate philanthropic practices. Journal of Corporate Finance, 12, 855–877.

    Article  Google Scholar 

  • Campbell, D., Moore, G., & Metzger, M. (2002). Corporate philanthropy in the U.K. 1985–2000 some empirical findings. Journal of Business Ethics, 39(1), 29–41.

    Article  Google Scholar 

  • Choi, J., & Wang, H. L. (2009). Stakeholder relations and the persistence of corporate financial performance. Strategic Management Journal, 30, 895–907.

    Article  Google Scholar 

  • Cordeiro, J., Veliyath, R., & Romal, J. (2007). Moderators of the relationship between director stock-based compensation and firm performance. Corporate Governance, 15, 1384–1393.

    Article  Google Scholar 

  • Cox, P., Brammer, S., & Millington, A. (2004). An empirical examination of institutional investor preferences for corporate social performance. Journal of Business Ethics, 52, 27–43.

    Article  Google Scholar 

  • Cuñat, V. (2007). Trade credit: Suppliers as debt collectors and insurance providers. Review of Financial Studies, 20, 491–527.

    Article  Google Scholar 

  • Dean, D. H. (2003). Consumer perception of corporate charitable donations. Journal of Advertising, 32(4), 91–102.

    Article  Google Scholar 

  • Delmas, M., & Terlaak, A. (2002). A framework for analyzing environmental voluntary agreements. California Management Review, 43(3), 44–63.

    Article  Google Scholar 

  • Dhaliwal, D., Li, O. Z., Tsang, A., & Yang, Y. G. (2009). Voluntary non-financial disclosure and the cost of equity capital: The case of corporate social responsibility reporting. Working paper. Hong Kong: University of Arizona and The Chinese University of Hong Kong.

  • Dyer, J. H., & Singh, H. (1998). The relational view: Corporative strategy and sources of inter-organizational competitive advantage. Academy of Management Review, 23, 660–679.

    Google Scholar 

  • Eccles, R., Loannou, I., & Serafeim, G. (2012). The impact of a corporate culture of sustainability on corporate behavior and performance. Harvard Business School working paper.

  • European Commission (Commission of the European Communities). (2001). Promoting a European framework for corporate social responsibilities. Brussels: COM (2001) 366 final.

  • Feldman, S. J., Soyka, P. A., & Ameer, P. G. (1997). Does improving a firm’s environmental management system and environmental performance result in a higher stock price? Journal of Investing, 6, 87–97.

    Article  Google Scholar 

  • Fields, L. P., Fraser, D. R., & Subrahmanyam, A. (2012). Board quality and the cost of debt capital: The case of bank loans. Journal of Banking & Finance, 36, 1536–1547.

    Article  Google Scholar 

  • Fisman, R., & Love, I. (2003). Trade credit, financial intermediary development and industry growth. The Journal of Finance, 58(1), 353–374.

    Article  Google Scholar 

  • Fombrun, C. J. (2005). The leadership challenge: Building resilient corporate reputations. In J. P. Doh & S. A. Stumpf (Eds.), Hand book on responsible leadership and governance in global business (pp. 54–68). Cheltenham: Edward Elgar.

    Google Scholar 

  • Freeman, R. E. (1984). Management: A stakeholder approach. Boston: Pitman.

    Google Scholar 

  • Friedman, M. (1970). The social responsibility of business is to increase its profits, New York Times Magazine, September 13.

  • Friedman, M. (1962). Capitalism and freedom. Chicago: University of Chicago Press.

    Google Scholar 

  • Gao, Y. (2009). Corporate social performance in China: evidence from large companies. Journal of Business Ethics, 89, 23–35.

    Article  Google Scholar 

  • Gardberg, N. A., & Fombrun, C. J. (2006). Corporate citizenship creating intangible assets across institutional environment. Academy of Management Review, 31(2), 329–346.

    Article  Google Scholar 

  • Godfrey, P. C. (2005). The relationship between corporate philanthropy and shareholder wealth: A risk management perspective. Academy of Management Review, 30(4), 777–798.

    Article  Google Scholar 

  • Godfrey, P. C., Merrill, C. B., & Hansen, J. M. (2009). The Relationship between corporate social responsibility and shareholder value: An empirical test of the risk management hypothesis. Strategic Management Journal, 30, 425–445.

    Article  Google Scholar 

  • Goss, A., & Roberts, G. S. (2009). The impact of corporate social responsibility on the cost of bank loans. Working paper. Toronto: Ryerson University and York University.

  • Graves, S. B., & Waddock, S. A. (1994). Institutional owners and social performance. Academy of Management Journal, 37, 1034–1046.

    Article  Google Scholar 

  • Heckman, J. (1979). Sample selection bias as a specification error. Econometrica, 47(1), 153–161.

    Article  Google Scholar 

  • Heinkel, R., Kraus, A., & Zechner, J. (2001). The effect of green investment on corporate behavior. Journal of Financial and Quantitative Analysis, 36, 431–449.

    Article  Google Scholar 

  • Huang, H., Shi, X., & Zhang, S. (2011). Counter-cyclical substitution between trade credit and bank credit. Journal of Banking & Finance, 35, 1859–1878.

    Article  Google Scholar 

  • Husted, B. W. (2005). Risk management, real options and corporate social responsibility. Journal of Business Ethics, 60, 175–183.

    Article  Google Scholar 

  • Jones, T. M. (1995). Instrumental stakeholder theory: A synthesis of ethics and economics. Academy of Management Review, 20, 404–437.

    Google Scholar 

  • Kennett, D. A. (1980). Altruism and economic behavior II: Private charity and public policy. American Journal of Economics and Sociology, 39(4), 337–353.

    Article  Google Scholar 

  • Mackey, A., Mackey, T. B., & Barney, J. B. (2007). Corporate social responsibility and firm performance: Investor preferences and corporate strategies. Academy of Management Review, 32(3), 817–835.

    Article  Google Scholar 

  • Margolis, J. D., Elfenbein, H. A., & Walsh, J. P. (2007). Does it pay to be good? A meta-analysis and redirection of research on the relationship between corporate social and financial performance. Working paper.

  • McWilliams, A., & Siegel, D. (2000). Corporate social responsibility and financial performance: Correlation or misspecification. Strategic Management Journal, 21(5), 603–609.

    Article  Google Scholar 

  • Meng, X. H., Zeng S. X., & Tam C. M. (2012). From voluntarism to regulation: A study on ownership, economic performance and corporate environmental information disclosure in China. Journal of Business Ethics, forthcoming.

  • Navarro, P. (1988). Why do corporations give to charity. Journal of Business, 61, 65–93.

    Article  Google Scholar 

  • Padgett, R. C., & Galan, J. I. (2010). The effect of R&D intensity on corporate social responsibility. Journal of Business Ethics, 93, 407–418.

    Article  Google Scholar 

  • Park, A., & Shen, M. (2003). Joint liability lending and the rise and fall of China’s township and village enterprises. Journal of Development Economics, 71, 497–531.

    Article  Google Scholar 

  • Patten, D. (2008). Does the market value corporate philanthropy? Evidence from the response to the 2004 tsunami relief effort. Journal of Business Ethics, 81, 599–607.

    Article  Google Scholar 

  • Peloza, J. (2006). Using corporate social responsibility as insurance for financial performance. California Management Review, 48(2), 52–72.

    Article  Google Scholar 

  • Petersen, M., & Rajan, R. (1997). Trade credit: Theory and evidence. Review of Financial Studies, 10, 661–691.

    Article  Google Scholar 

  • Porter, M. E., & Kramer, M. R. (1999). Philanthropy’s new Agenda: Creating value. Harvard Business Review, (November–December).

  • Porter, M. E., & Kramer, M. R. (2002). The competitive advantage of corporate philanthropy. Harvard Business Review, (December):56–68.

  • Porter, M. E., & Linde, van der C. (1995). Green and competitive. Harvard Business Review, (September–October):149–163.

  • Richardson, A. J., & Welker, M. (2001). Social disclosure, financial disclosure and the cost of equity capital, accounting. Organizations and Society, 26(7–8), 597–616.

    Article  Google Scholar 

  • Rigby, D. (2001). Moving upward in a downturn. Harvard Business Review, 79, 98–105.

    Google Scholar 

  • Saiia, D. H., Carroll, A. B., & Buchholtz, A. K. (2003). Philanthropy as strategy: When corporate charity ‘‘begins at home’’. Business and Society, 42(2), 169–201.

    Article  Google Scholar 

  • Sánchez, C. M. (2000). Motives for corporate philanthropy in El Salvador: Altruism and political legitimacy. Journal of Business Ethics, 27(4), 363–375.

    Article  Google Scholar 

  • Schwartz, R. (1974). An economic model of trade credit. Journal of Financial and Quantitative Analysis, 9(4), 643–657.

    Article  Google Scholar 

  • Sen, S., & Bhattacharya, C. B. (2001). Does doing good always lead to doing better? Consumer reactions to corporate social responsibility. Journal of Marketing Research, 38(2), 225–243.

    Article  Google Scholar 

  • Sengupta, P. (1998). Corporate disclosure quality and the cost of debt. The Accounting Review, 73(4), 459–474.

    Google Scholar 

  • Sharfman, M. P., & Fernando, C. S. (2008). Environmental risk management and the cost of capital. Strategic Management Journal, 29(6), 569–592.

    Article  Google Scholar 

  • Shleifer, A., & Vishny, W. (1994). Politicians and firms. Quarterly Journal of Economics, 109, 995–1025.

    Article  Google Scholar 

  • Simon, F. L. (1995). Global corporate philanthropy: A strategic framework. International Marketing Review, 12(4), 20–37.

    Article  Google Scholar 

  • Smith, C. (1994). The new corporate philanthropy. Harvard Business Review, (May–June):105–115.

  • Smith, H. J. (2003). The shareholders vs. stakeholders debate. MIT Sloan Management Review, (Summer):85–90.

  • Su, J., & He, J. (2010). Does giving lead to getting? Evidence from Chinese non-SOEs. Journal of Business Ethics, 93, 73–90.

    Article  Google Scholar 

  • Wokutch, R. E., & Spencer, B. A. (1987). Corporate saints and sinners: The effects of philanthropic and illegal activity on organizational performance. California Management Review, 29(2), 62–77.

    Article  Google Scholar 

  • World Bank. (2000). China’s emerging non-SOEs: Prospects for the new century. International Finance Corporation.

  • Ye, K., & Zhang, R. (2011). Do lenders value corporate social responsibility? Evidence from China. Journal of Business Ethics, 104, 197–206.

    Article  Google Scholar 

  • Zhang, R., Rezaee, Z., & Zhu, J. (2009). Corporate philanthropic disaster response and ownership type: Evidence from Chinese firms’ response to the Sichuan earthquake. Journal of Business Ethics, 91, 51.

    Article  Google Scholar 

  • Zhang, R., Zhu, J., Yue, H., & Zhu, C. (2010). Corporate philanthropic giving, advertising intensity, and industry competition level. Journal of Business Ethics, 94, 39–52.

    Article  Google Scholar 

Download references

Acknowledgments

This paper is supported by the National Natural Science Foundation of China (Nos. 71002032 and 71102118), the Fundamental Research Funds for the Central Universities, the Research Funds of Renmin University of China (Nos. 11XNJ006, 11XNK030), 2012 merit-based scientific and technological projects to returned scholars from overseas by Beijing Municipality and Beijing Municipal Commissions of Education (Research Base- Science & Technology Innovation Platform-Accounting-based Investor Protection) (PXM_014213_000031).

Author information

Authors and Affiliations

  1. Business School, Renmin University of China, Beijing, 100872, China

    Min Zhang, Lijun Ma & Wen Zhang

  2. Business School, China Center for Venture Capital Research, Beijing Technology and Business University, Beijing, China

    Jun Su

Authors
  1. Min Zhang
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Lijun Ma
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Jun Su
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Wen Zhang
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Jun Su.

Appendix

Appendix

See Table 10.

Table 10 The percentages of SOEs and non-SOEs in 7 countries
Full size table

Rights and permissions

Reprints and permissions

About this article

Cite this article

Zhang, M., Ma, L., Su, J. et al. Do Suppliers Applaud Corporate Social Performance?. J Bus Ethics 121, 543–557 (2014). https://doi.org/10.1007/s10551-013-1735-x

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-013-1735-x

Keywords

Search

Navigation