Corporate social responsibility and corporate financial performance in China: an empirical research from Chinese firms

Abstract

Purpose: Although the relationship between corporate social responsibility (CSR) and financial performance has become a hot topic of the Western management community after several decades of arguments, there is still little empirical literature about the relationship between Chinese companies' CSR and financial performance. According to the investigation of Chinese companies, this paper aims to use stakeholder theory to answer this question. Design/methodology/approach: A theoretical framework is proposed based on the stakeholder theory by defining nine kinds of stakeholders and viewing the companies taking CSR as giving responses to the interest requirement of these stakeholders. Some agent variables are also set to depict CFP. Subsequently, this paper uses the data collected in 2007 and 2008 from Chinese firms to explore the relationship between CSR and corporate financial performance (CFP) empirically. Findings: The results show that companies' social responsibility activity can improve their financial performances of the current year, have significant effects on their financial performances of the next year, and vice versa. The variation of CSR and financial performance can also significantly influence each other. Originality/value: This research integrates the factors of time delay and cause‐effect with the relationship of CSR and CFP, and then provides theory support for companies taking CSR.