The Study Of Relationship Between Corporate Social Responsibility And Financial Performance

Enterprises that carry out their social responsibility fully will help to set excellent external image, and bring a positive impact on the development of the corporation. This article mainly focuses on the relationship between the corporate social responsibility and the financial behavior, considering different ownership backgrounds and different areas. By studying the relationship between corporate social responsibility and financial performance, enterprises will pay more attention to the preparation of the Social Responsibility Report, because we have found that there is a positive relationship between these two factors.The first chapter focuses on the backgrounds, significance, the content, research methods, and how the article is organized.The background of this paper is divided into realistic background and policy background. For a long time, Chinese enterprise has gone a road of "high energy consumption, high pollution, high input". Enterprises spend a lot of manpower and material resources, environmental resources therefore the development of enterprises brought a series of major issues. In particular, the following issues:1) employees aspects:the phenomenon of wage arrears is generally outstanding, poor working conditions, frequent production accidents, corporate staff jumping;2) consumer customers:food safety issues, shoddy products;3) Government:serious tax evasion, officials bribery;4) shareholders aspect:refusing to dividends the shareholders and so on;5) environmental aspects:environmental pollution, serious waste of resources, excessive consumption of energy. Against the background of this reality, our government also introduced a series of policies to encourage enterprises to fulfill their social responsibilities. In2009, China issued the "China Corporate Social Responsibility Blue Book2009" and other normative documents. These documents encourage companies to fulfill more social responsibility.The significance of the article is as follow:(1) By scientifically study the relationship between corporate social responsibility and financial performance, there is a clear positive impact on the operation of company. The companies have to pay attention to other entity such as suppliers, employees, customers, government, and social environment.(2) This article allows enterprises to understand the relationship between social responsibility and performance, enables enterprises to pay attention to the preparation of the Social Responsibility Report, promotes the sustainable development of enterprises.(3) by comparing the different forms of ownership background, different parts of the enterprise, we will be more clear about the relationship between social responsibility and financial performance.The second chapter is literature review. I have reviewed the definition of social responsibility at home and abroad, including the initially concept of social responsibility, the development and improvement of social responsibility. Then the article has reviewed the motivation of enterprises to fulfill their social responsibilities, mainly includes three aspects:to establish a good external image; to reduce information asymmetry and reduce the cost of equity; to reduce transaction costs and improve the efficiency of the transaction. Also this article has combed the relationship between corporate social responsibility and operating results. Some scholars hold the idea that corporate social contribution and operating results were positively correlated, and some scholars believe that corporate social contribution and results of operations is not related or negatively correlated.The third chapter is the theoretical analysis and hypotheses. Under Signaling theory, state-owned enterprises have more interest to deliver a positive signal to show the development of the industry, the country’s economic strength and the people’s livelihood. State-owned enterprises may fulfill more social responsibility than the non-stated-owned enterprises. Ultimate control theory thinks that non-state-owned enterprises will make decision under the idea of "best putout, least put in". Therefore, in this paper I have assumed that there is a positive relationship between social responsibility and financial performance for non-stated-corporations; yet negatively correlated or irrelevant if the corporations are stated-owned. Finally, taking into account the different regional, there will be a difference on different enterprises. So the third assumption:located in the higher degree of market-oriented regions, there is a positive effect between social responsibility and financial results; located in the lower degree of market-oriented regions, there is a negative effect between social responsibility and financial results.The fourth chapter is the empirical analysis. Through empirical analysis,I found the state-owned enterprises carry more social responsibility than the non-state-owned enterprises. This is due to the special background of China’s socialist market economy, state-owned enterprises, especially large monopoly state-owned corporations. Not only they have economic responsibilities, but also bear the political responsibility. The state-owned enterprises have to make a positive contribution to maintain social stability and improve people’s livelihood. Compared to the non-state-owned economy, they have a more intense motivation to deliver a positive signal to show the development of the industry, the economic strength of the country and the people’s livelihood.Then the paper focuses on relationship between social responsibility and financial performance based on different background of the enterprises. By empirical analysis I found that the relationship of social responsibility of state-owned economy and corporate performance is negatively correlated or irrelevant; rather than social responsibility of state-owned economy and corporate performance was positively correlated.Even the state-owned enterprises and non-state-owned enterprises fulfill their social responsibilities as the same; the results content a big deviation. Why is that? I speculate that may be a result of varying degrees of market-oriented economic. So the article further explores the relationship between the different regions of enterprises to fulfill social responsibility and financial performance. In this paper, empirical studies found that located in the higher degree market-oriented regions; there is a positive effect between social responsibility and financial results; if the market is not so open, the result may be negative.The fifth chapter is the research conclusions, significance, and policy. This is the first empirical test of different owners backgrounds and different areas of corporate social responsibility and financial performance, the results clearly answer the two basic questions of corporate social responsibility and financial performance:(1) the social responsibility of the state-owned economy and corporate performance is negatively correlated or irrelevant. Social responsibility of non-state-owned economy and corporate performance was positively related.(2) The process of marketization also affected the relationship between the company’s social responsibility and financial performance. In the higher degree of market areas, non-state-owned enterprises that fulfill social responsibility will bring more financial result than the non-state-owned enterprises in the lower degree regions.Finally, a few suggestions are made. In the first place, establish social responsibility evaluation system. Corporate social responsibility content economic and legal obligations, environmental protection, employee well-being and care about politics. Strengthen the information disclosure of corporate social responsibility. Legal form of corporate social responsibility report is needed. Improve the corporate social responsibility of oversight mechanism. Establish government oversight mechanisms. The government can implement corporate social responsibility down to the form of the relevant laws and regulations.