A Study On The Peer Effects In Corporate Social Responsibility

Comrade Xi stressed that "only loving wealth is truly meaningful wealth,and only enterprises that actively assume social responsibility are the most competitive and viable enterprises." In addition,with the implementation of sustainable development strategy and the concept of building a harmonious society,it is particularly important for Chinese enterprises to gradually go out and actively assume social responsibility in the context of the integration of the world economy,such as "Belt and Road",economic globalization and so on.However,in recent years,the frequent exposure of CSR crisis events,such as the Changchun Changsheng Vaccine case,Melamine Milk Powder Incident,seriously damaged the public interest and corporate reputation,and thus corporate social responsibility and entrepreneurship have once again become the focus of public attention.Therefore,this paper chooses to take CSR as the research topic,but unlike from the third-party perspective or enterprises themselves perspective,like media supervision,to explore CSR,this paper is an in-depth and systematic analysis of corporate social responsibility based on the "peer effect" theory emerging from psychology,pedagogy,public economics and other fields.The paper uses a sample of the listed companies in China from 2003 to 2018 analyzing the existence,influencing factors,imitation mechanisms and the economic consequences of the peer effects of CSR in depth and systematically,in order to deeply understand how the peer firms affect the corporate social responsibility decisions of focus firm,and whether this impact can gradually improve the current status of social responsibility performance.Besides,this paper also wants to explore whether peer effects can properly explain the industry and region convergence of CSR,and whether policy makers can and how to use the peer effects between enterprises to improve policy effectiveness.In particular,the article first examines the existence of the peer effects in corporate social responsibility,and further analyzes the factors influencing the size of the peer effects.The study found that:(1)the target company will be affected by the average level of CSR of peer firms in the same region,so that the performance of CSR among enterprises in the same region tends to be consistent,showing "peer effects".(2)However,the enterprise will not respond to the CSR of the peer firms in the same industry,which is different from the previous research conclusion on financial decision-making,for example,peer firms in the same industry would affect the corporate capital structure of the target firm(Leary and Robert,2014),the merger and acquisition decision(Wan et al.,2016),and investment decision-making(Chen and Ma,2017).It may be because CSR is a long-term strategy in improving corporate financial performance,but there is a more direct and competitive relationship among peer firms in the same industry,and market conditions change rapidly.Therefore,the first goal of a business is to survive,preferring to allocate limited resources to daily operations rather than focusing too much on corporate social responsibility.(3)The examination of the industry competition degree showed that the more competitive industry a company is,the less likely it is to imitate the CSR of its peers.This is different from peer effects in financial decision-making that when the industry competition is more intense,enterprises in this industry usually pay more attention to peer firms' financial decisions,such as mergers and acquisitions decisions(Wan et al.,2016)and capital structure decisions(Leary and Robert,2014),in order to maintain their rank in the field,or reduce pressure from competitors,which also supports that the more intense the industry competition is,the less attention companies pay to.(4)The article further targets the heterogeneity of the industry,and divides the sample into two groups:heavy pollution and non-heavy pollution group,and the results show that CSR decision in heavy pollution industry will be directly related to the survival and development of enterprises,which is as important as financial decisions,therefore,these enterprises will pay attention to and learn from CSR of its peers in the same industry.(5)In addition,we show that when the number of local private enterprises is greater,the marketization is less developed,and areas with more government intervention,peer effects in CSR is stronger.At the same time,when the company hires the Big Four as the audit unit,it will not imitate its peers.The more transparent information is,the stronger peer effects in CSR is.Cross-sectional tests mean that the premise of enterprises'imitating their peers'CSR is to prioritize their own survival and development of enterprises,for example,in areas where there is a lot of government intervention,necessities for survival and development can't be fully and freely based on the market for deployment,but more rely on government allocation.Therefore,enterprises will imitate their peers'CSR to make more charitable donations,share the pressure of local government to maintain political relations,striving for more political resources to ensure the development of enterprises.This is consistent with the conclusion made by the main regression finding that there are no peer effects in CSR among firms in the same industry.Moreover,the results also mean that social responsibility as an important way to shape the corporate image and build corporate reputation,is a substitution for corporate reputation accumulated by Big Four auditing and high quality of information disclosure to some extent.After a series of robustness tests,the regional peer effect of CSR is still present.Secondly,on the basis of existential research,the article further explores the imitation mechanisms of corporate social responsibility.The study found that:(1)The regional peer effects of CSR follows the imitation law of "first inside and then out",and the regression results of"property nature" and "the centrality of the executive director network" prove this law.Specifically:the regression of property show that state-owned enterprises will imitate state-owned enterprises,and private enterprises will imitate private enterprises,that is,the same property nature of enterprises will be preferred to be imitated.The centrality of the executive director network is based on the background of information acquisition,the results show that enterprises with higher center of executive director network will imitate enterprises with equally high centrality of the director network,and enterprises with low centrality of the director network will imitate each other,but the enterprises with different director network centers will not imitate each other.This also reflects the"first inside and then out" imitation law.(2)Furthermore,the peer effects of CSR follow the law of "logical imitation".The regression of corporate status found that the leading enterprises did not imitate their peers,and the followers did not imitate the leading enterprises.This may be because the leading companies have larger assets,stronger risk resistance,more resources,and more decision-making ability of executive team,and are more able to bear the cost of social responsibility decision-making mistakes,so it is more likely to make CSR decisions independently.While followers tend to imitate the followers in the same region with more similarities,rather than blindly and unrealistically imitating the leading companies,which supports the "logical imitation law" of peer effect in CSR.The above conclusions still hold after a series of robustness tests.Finally,this paper identifies the economic consequences of peer effects of corporate social responsibility from the internal perspective(research and development input)and external perspective(government subsidy,debt financing cost)respectively.We found that:(1)With the strengthening of peer effects in corporate social responsibility,CSR will not crowd out the input of R&D,but can help enterprises to create more resources for current and future research and development investment.(2)To imitate and learn from the social responsibility of peer firms in the same region,not lagging behind the average social responsibility performance of peer firms can also help enterprises to obtain more government subsidies.(3)In addition,in line with the regional average corporate social responsibility level,can help enterprises reduce the current and future debt financing costs.(4)The results of further analysis show that the comparable social responsibility will be counterproductive,crowding out the enterprise's research and development investment,and leading to higher debt costs.(5)Moreover,the lower the degree of marketization is,the stronger peer effects of CSR are,since companies want to obtain more government subsidies.However,if the number of local private enterprises is large,the peer effect of CSR will reduce the amount of government subsidies received by enterprises.The conclusion of the study can explain to some extent why enterprises would imitate and learn from the social responsibility of their peers in the same region.The academic contribution of this paper mainly lies in:(1)Enriched the literature of peer effects in non-financial decision-making about the existence,influencing factors and imitation mechanisms.First of all,peer effects in corporate financial decision-making is a new problem that researchers have begun to pay attention to recently,but the number of documents is still small,and the research on non-financial decision-making involving CSR is less.And the existing literature is mostly limited to the existence of peer effects,while the imitation mechanisms still lacks systematic analysis and strict empirical test.This paper carries out in-depth,systematic theoretical and empirical analysis of the influence factors and mechanisms of peer effects in CSR,which will enrich the previous research.It provides reference for the study of peer effects in other fields.(2)Enriched the study on the economic consequences of peer effects.There is a lack of literature on the economic consequences of the peer effect,this paper explores the economic consequences from the inside and outside perspectives:research and development input,government subsidies and debt financing costs,which will fill the gap in peer effects in CSR.(3)Enriched the study of motivation and influencing factors for corporate social responsibility.Although the study on CSR are very fruitful,previous researches focused on the influencing factors from the perspectives of the enterprise's own characteristics and third-party influence,such as financial performance,product characteristics,governance structure,media supervision,etc.Few literatures took peer firms into consideration.This paper differs from the external environment and the enterprise's own factors to explain the motivation and influencing factors of the social responsibility performance of listed companies in China,but from the perspective of social interaction,using the theory of"peer effect" to explain the influencing factors of CSR,enriching the literature related to social responsibility.(4)Enriched the test of the economic consequences of corporate social responsibility.This paper explores whether CSR under the influence of the peer firms is rational,whether it will crowd out the research and development investment,whether it can win more government subsidies for enterprises,and how creditors will price capital.On this basis,the economic consequences of blind comparison effect are analyzed,and the economic consequences of cross-sectional test of chapter four are analyzed in depth.The analysis of the economic consequences of CSR caused by social interaction,and at the same time,it is more in-depth and systematic,making some supplements to the previous literature.Finally,this paper also has a certain practical significance:(1)social efficiency:"may solve social problems." The existence of the "peer effect" of corporate social responsibility means that peer firms can influence each other and thus assume more social responsibility.Enterprises fulfill their social responsibilities more actively,which is conducive to the construction of a harmonious society and promotion of social stability and rapid development.In addition,"peer effect" can also stimulate more information disclosure of CSR,improving the transparency of information,providing investors with a higher-quality investment environment,helping market develop more stably and orderly.(2)Regulatory perspective:the "amplifier" of policy.Becker and Murphy(2000)argue that small-scale policies can amplify their effects through social interaction,creating a "social multiplier" whose existence helps to improve the effectiveness of policies.Specifically,the regulators require companies to do more to fulfill their social responsibility and disclose highquality social responsibility reports,but with poor results.This study helps the regulatory authorities to make full use of the imitation mechanism of "peer effect" when making policy.(3)Enterprise perspective:to gain competitive advantage.By passing on the information flow and learning from each other,listed companies can overcome the imperfection of information,reduce the risk of decision-making failure,make the allocation of enterprise resources more efficient,and also help to protect and improve the reputation of managers.Therefore,it is beneficial for enterprises by referring to peer firms'CSR to allocate available resources more effectively,establish good stakeholder relations,get more government subsidies,reduce the cost of debt financing,create resources for future research and development investment,and ensure a good competitive environment,so as to win competitive advantage for enterprises.