Study On The Relationship Between Corporate Social Responsibility And Enterprises’ Value Based On Market Competition In Products

Since the1990s, the world set off a campaign of "corporate social responsibility". In this context, our country is also increasing emphasis on corporate social responsibility issues, and at the same time, the government has taken appropriate measures to lead enterprises to fulfill their social responsibilities. From2006the Standing Committee of National People’s Congress amended the "Company Law" which requires companies to actively commit to social responsibility, to2010, five ministries, such as the Ministry of Finance, issued the "Internal Control Application Guide-Fourth Social Responsibility", it can be concluded that concerns on the fulfillment of social responsibility from the various interest groups are growing. Thus, in recent years, a number of state-owned enterprises as well as many listed companies disclosed their social responsibility accounting in formations in different forms to the public. However, the enterprise’s comprehensive strength and its value can be enhanced if it performs social responsibility and releases social responsibility report, just like the "stakeholder theory" puts it? If so, why are there so many companies from all sectors of the society blindly regard profit maximization as their production and operating target ignoring their social responsibility, as disregard?At present, there are many empirical studies on CSR and corporate value. But these studies did not come to a unified conclusion, and the findings are different from each other. These differences may indicate that the relationship between CSR and corporate value need to be explored deeper. Thus the existing research results can not exactly reveal their inherent relationship. After all, in addition to the factors taken into accounts by the scholars before, there are other factors that affect the corporate social responsibility activities. In addition, a company’s production and business activities are inseparable from the market. And as the external production and operation environment of the company, product market competition inevitably has an impact on the fulfillment of its corporate social responsibility. Since the degree of competition varies from industries, companies in full competitive sectors do not perform its competitive advantage obviously within its own industry. They can significantly enhance their competitive position by fulfilling certain social responsibilities, thereby bringing the increased business value. Although many scholars recognize that different degree of competition in different sectors can affect companies’fulfillment of corporate social responsibility, there is still a lack of in-depth research on the relationship between the operating mechanism and the degree of competition in the industry. Therefore, this paper argues that the consideration on the impact of product competition in the market on enterprises’fulfillment of their social responsibility and corporate relations value has an important meaning. It can promote listed companies in different industries to better understand social responsibility activities, thus contributing to its fulfillment of social responsibility more voluntarily and more positively.Learning from the past research scholars, this paper reviews the theory of product market competition and social responsibility to fulfill, followed by the analysis of the impact on the enterprise’s value generated by the fulfillment of corporate social responsibility as well as the product market competition on the relationship between the two. Finally, according to the theories analyzed, the paper proposed hypothesis constructs the corresponding regression model and tests it with data from the Shanghai and Shenzhen A-share listed companies of2009-2012. In the empirical analysis, the paper gives descriptive statistics and correlation analysis for each variable. Then the impact on the enterprises’value generated by the fulfillment of the corporate social responsibility is tested by regression analysis. By introducing the interaction term of social responsibility and product market competition, the test can further clarify the impact of product market competition on corporate social responsibility and the value of the relationship.The research idea of this paper is:The first chapter is an introduction. Research background, purpose and meaning are the three main parts of the introduction. Along with it is a brief description of the contents, methods and technical route of this article. Finally there is an overview of the innovations of the article.The second chapter is a review of the literature. This part of the research results from the domestic and foreign scholars who study this question, including a study of the progress of the relationship between corporate social responsibility and the value of the enterprise recent decades as well as the current state of research. Following is related comments.The third and fourth chapters are theoretical analysis. As the theoretical basis for the empirical analysis, these two chapters definite and analyze some concepts, such as theories of corporate social responsibility, product market competition, corporate value, as well as other stakeholders theories. According to these results, the paper also put forward a definition of the various concepts. Meanwhile, in the fourth chapter, the paper attempts to analyze theoretically the associations within corporate social responsibility, product market competition and enterprise value. After defining who the stakeholders are, the paper analyzes the impact on the enterprise’s values conducted by the different dimensions of the fulfillment of corporate social responsibility. At the same time, for those enterprises from various sectors which performs different degrees of competitions, the paper also analyzes their impacts on the enterprises’value by their fulfillment of social responsibility.The fifth chapter is to set out the design and empirical analysis. This chapter puts forward the research hypotheses and gives research samples of this paper based on the theoretical analysis. What’s more, a detailed elaboration on the selected variables’ accordance and definition is given. Descriptive statistical analysis and correlation testing as well as regression testing are following after the constructed regression model. The paper also tests the robustness of the empirical results, which leads to the empirical results of this paper.The sixth chapter is the conclusions and policy recommendations. This part firstly overviews the research findings and then makes recommendations from government, society, markets and companies. Finally it points out the research paper defects and some future research prospects.The results showed that:1. The influence on the company’s value implemented by the enterprises social responsibility. There is a significant positive correlation between enterprises who taking responsibilities for their shareholders, employees, suppliers, consumers, the government and their corporate values. It illustrates that listed companies can improve their values by fulfilling their responsibilities for their shareholders, employees, suppliers, consumers and the governments; However, fulfilling the philanthropic responsibility has a significant negative correlation with corporate value. Nowadays, it becomes much more fair and transparent for the corporate to fulfill more charity performance as an obligation rather than liability, which can indirectly increase the revenue which performs as social identity and goodwill. And this income is relatively small compared to the cost. So the performance of charity responsibility and corporate value is negatively correlated.2. The impact of the interaction term, corporate social responsibility and product market competition, on the enterprise value. The empirical results showed that, compared to the weaker degree of competition in product markets, in the much more intense competitions, the improvement of the corporate value is much more obvious in the condition that enterprises can fulfill the government’s responsibility. And in the meantime, it can reduce the negative effect imposed by the enterprises’ charitable behavior. The above result indicts that the impact on the enterprises’ value imposed by their behaviors of taking the social responsibilities can be stronger with the strengthening of the product market competition.Innovations of this paper are the following:(1) This paper puts forward a new concept of corporate’ social responsibility on the basis of the summary of the previous studies. According to China’s actual situation, by using accessible financial reports and CSR reports, the paper decomposes quantitative indicators which are much more frequent and representative to seven specific indicators, aiming to measure the relationship of corporate social responsibility and corporate value from various aspects.(2) This article introduces the industry competition factors innovatively and decomposes it to specific indictors. The paper proposes a hypothesis:in the condition that other factors remain unchanged, for enterprises in more competitive industries, their impact on the enterprise’s value conducted by its fulfillment of social responsibility is much more obvious. Research based on industry competitive degrees validates the relationship among corporate social responsibility, corporate value and degrees of competitive industries, which is also a supplement for the domestic study on the topic in recent years.(3) In the empirical research, the paper set property scale and nature of the largest shareholder as two control variables, and studied the impact on corporate value based on the fulfillment of corporate social responsibility under different property rights and the proportion of the first shareholder. The empirical results show that the nature of the relationship of the enterprise and its property value is a positive correlation. However, but the test showed a negative correlation on the relationship between the proportion of its largest shareholder and its value.Limitations of this study are the following aspects:Firstly, the choice of corporate social responsibility indicators depends on a lot of subjectivity, in spite of its reference on the research of many scholars. It may be inappropriate and may not fully reflect the actual situation of enterprises’ fulfillment of their social responsibilities; Secondly, the selected sample time span is not long. So it cannot study the relationship between the value of corporate social responsibility and its business from the perspective of a longer period. For example, if a company takes responsibility for its consumers and social public welfare in the current period, it will reduce corporate values, which is contrary to what most people think. Perhaps, the relationship between them need a longer span to verify and test, which is also the direction of the further studies; Finally, this paper introduces the factor of product market competition when studying the relationship between corporate social responsibility and the value of the enterprise. There is not so much related research in domestic study, resulting in a few lessons that can be learned from. Limited by the author’s research level, a deeper relationship among the product market competition and the other two may not be taken into account, thus affecting the accuracy of the study.For future research:First, further research can be based on uniform caliber to analyze the types of stakeholders; secondly, financial and non-financial indicators can be included in the selection. Meanwhile, in order to increase the credibility of the study, principal component analysis can also be used to design a comprehensive system to measure the corporate social responsibility.