Ownership Property, Corporate Social Responsibility And Financial Performance

Along with the rapid development of social economy, the progress of science and technology and people’s material and cultural level rising, a series of social problems appear at the same time, such as food and drug safety problems, environment and resources protection, employee’s rights, production safety problem, etc.. Corporate social responsibility (CSR for short) has become a hot issue of public concern in China. Government institutes have issued relevant policies and regulations, to guide listed companies to conduct the social responsibility actively, to implement the social responsibility strategy, encourage companies to assess the implementation of CSR regularly, and disclose social responsibility report voluntarily.The enterprise faces more pressure of the external environment along with the sustainable development concept and CSR consciousness embedded, such as national policies and regulations, stakeholders’ more requirements, which forcing firms to change the traditional management idea to re-examine the relationship with the society.To conduct CSR is a foregone conclusion. CSR has become an important part of enterprise’s future development. Some enterprise’s goal, which is not only to maximize profits, has begun to pursuit the target of economic benefit and social benefit also. Since1970s, foreign scholars have begun to research the issue of CSR gradually. The comparison of CSR with financial performance (FP for short) has been a popular field of study within a lot of fields of CSR. Research on the relationship between CSR and FP has a lot, but the conclusions are inconsistent.Enterprise is a contract organization for profit. The fulfillment of social responsibility will be inevitably accompanied by the increase of cost, but may not conform to the principle of cost effectiveness and bring real benefits, which is internal reasons that companies are not willing to fulfill social responsibility. Only with the financial performance increasing, can corporate have the intrinsic motivation to conduct the social responsibilities. Some scholars believe that to conduct social responsibility will increase the current cost, but may improve the reputation of the enterprise in the long-term and raise the enthusiasm of the staff and production efficiency. In addition, under the special institutional background of China, the government’s policy intervention and state-owned shareholding system foundation may lead that enterprises with different nature of the property rights have different external pressure and internal motivation in fulfilling social responsibility and fulfilling social responsibility also have different financial performance impact. What kind of impact would CSR have on the same period and the late financial performance? Whether enterprises (especially state-owned enterprises) fulfilling the social responsibility conform to the principle of cost-effectiveness in the allocation of social resources under the pressure of national policy?Combining with the background of China economy institution during transition, this paper studies CSR’s effect on the same period and the late financial performance, and ownership property’s impact on the relationship of CSR-FP. Studying the relationship quantitatively between them can advocate to enterprises that set up the concept of sustainable development, fulfill social responsibility, and provide a scientific basis in decision-making for the enterprise’s stakeholders at the same time. This study can help enterprises to achieve the balance between social responsibility and financial performance and provide theoretical basis for enterprises to carry out the strategy of corporate social responsibility. From the perspective of ownership property, it can also provide important theoretical support for government’s policymaking, CSR’s practicing and the spread of CSR in the whole nation.Based on such theoretical framework, this article is divided into six parts. Each part is summarized as follows.Chapter1:Introduction. This chapter firstly describes the research background of the selected topic. Then based on the present situation of CSR in China, we put forward a clear research purpose and illuminate the theoretical and practical significance of this study. After that, we construct the logical framework and overview the contents of this paper. And the following section presents the methodology used in the article, and point out the possible innovation points. Chapter2:Literature review. The main content of this part is to review the connotation of corporate social responsibility briefly and to comb the domestic and foreign scholars’ideas of CSR’s impact on financial performance. There are three representative opinions:Tradeoff hypothesis, Social impact hypothesis and Complex social impact hypothesis. In order to present research idea for this paper, we analysis the possible causes of different research conclusions by summing up the previous corresponding research literature of three hypothesis.Chapter3:The background of economic system in China. Combined with the special background of transitional economic system in our country, this chapter analyzes the different nature of property rights and corporate goals, and compares the social responsibility fulfillment and the causes of differences between the state-owned and non-state-owned enterprises, then puts forward the research hypothesis of this paper. State-owned enterprises have economic and non-economic goals; face more policy pressure of political intervention; the cost of social responsibility is undertaken by the company. Therefore, social responsibility level in state-owned enterprises is higher, but the efficiency of CSR is relatively lower because of less consideration of cost-effectiveness in the fulfillment. However, all business activities in private enterprises, including social responsibility activities, will also follow the principle of cost-effectiveness in order to enhance corporate profits and increase shareholder wealth. Finally, we put forward the hypothesis on the basis of theoretical analysis:(1) corporate social responsibility has negative impact on the concurrent financial performance;(2) corporate social responsibility has positive impact on the subsequent financial performance;(3) corporate social responsibility in state-owned enterprises will have much more negative impact on the same period financial performance than that in non-state-owned enterprises;(4) corporate social responsibility in state-owned enterprises will have less positive impact on the subsequent financial performance than that in non-state-owned enterprises.Chapter4:Research design. We adopt prior studies on CSR, measure CSR according to enterprise’s contribution to the stakeholders (creditors, customers, suppliers, employees, government and society) and choose the accounting performance and market performance to measure financial performance. And then we build the multiple linear regression models, and using A-share listed companies from2008to2011as samples to test hypothesis.Chapter5:Empirical testing results and analysis. Firstly, we use descriptive statistics analysis to overview the total sample data and group the sample by the nature of the ownership. The results showed that there is a significant difference in the geometric means of variables between state-owned enterprises and non-state-owned enterprises. Secondly, we use correlation analysis to examine rationality of the model and the appropriateness of variables preliminarily. The results showed that financial performance has close relationship with CSR, but the correlation is stronger than prior CSR. Thirdly, the article use OLS regression to test the models. We found that CSR has positive impact on the concurrent and subsequent financial performance (both accounting performance and market performance), the regression results in the same period is expected, long-term without expectations; State-owned property will weaken the positive influence of CSR on FP, in line with expectations. Finally we increase the robustness test in this chapter.Chapter6:Conclusion and the suggestion. This part summarized the research conclusion of this article:CSR can improve financial performance; State-owned property will weaken the role of CSR on FP. Then, based on results of the study, the author makes some suggestions to the enterprise on how to perform social responsibility. Finally, the paper pointed out this research limitations and deficiencies to indicate the future research direction.The main contributions of this paper are as follows:Firstly, there is lots of research on the influence of the corporate social responsibility on financial performance in China. But these studies did not consider the special institutional background and usually regard ownership property as a control variable. Based on China’s economic system background, this article introduces the property right theory and analyzes difference of political pressure and administrative intervention in different ownership property enterprises. Explain the ownership property influence of CSR on financial performance systematically enrich the theory of corporate social responsibility.Secondly, considering the effects of CSR in the persistence and long-term effect, this paper gives the contrast analysis of the impact on concurrent and subsequent financial performance, which can provide theoretical support in the promotion of corporate social responsibility in China.Thirdly, on the basis of former researchers for reference, this paper considers enterprise stakeholders comprehensively to measure corporate social responsibility and using the accounting and market performance to measure financial performance. It demonstrates that motivation differences in different ownership nature enterprises lead to different effects of CSR on FP.