Empirical Study Of The Relationship Between The Corporation Social Responsibility (CSR) And The Financial Performance (FP)

Corporation Social Responsibility (CSR) has led to a heated and extensive discussion since it was first come up as a concept. Different government departments of China have also promulgated guideline or notice to encourage enterprise to take the responsibility for the society and release the CSR reports. But there’s still an agreement about whether CSR benefited the enterprise’s Financial Performance (FP). In this paper, I will build a Structural Equation Model between the CSR and FP of the listed companies from Shanghai and Shenzhen. According to the Triple Bottom Line, the CSR will be divided into small parts as Economic Responsibility, Environmental Responsibility and Social Responsibility. The FP will also be divided into3parts as profitability, solvency and operating capacity. Structural Equation Model will demonstrate the relationship between the CSR and the FP, from which I drew the conclusion that, in a short time, the Economic Responsibility and Environmental Responsibility may have a negative effect on the company’s profitability, while Social Responsibility does benefit the profitability. However, in the long term, CSR definitely has the positive effect on the FP, which proven by a panel analysis of the listed companies from Shanghai and Shenzhen.