The Effectiveness of Internal Control and Corporate Social Responsibility: Evidence from Chinese Capital Market

Xiao Li, Chunmei Zheng, Gang Liu and Muhammad Safdar Sial
Additional contact information
Xiao Li: Economics and Management School of Wuhan University, Wuhan 430072, China
Chunmei Zheng: Economics and Management School of Wuhan University, Wuhan 430072, China
Gang Liu: Economics and Management School of Wuhan University, Wuhan 430072, China
Muhammad Safdar Sial: Economics and Management School of Wuhan University, Wuhan 430072, China

Sustainability, 2018, vol. 10, issue 11, 1-18

Abstract: From the perspective of the effectiveness of internal control, according to the Stakeholder Theory, Principal-Agent Theory and Reputation Theory, this paper analyzes comparatively the influences of internal control on the assumption of corporate social responsibility (SCPS) from the accrual basis, and the fulfillment of corporate social responsibility (CSRF) from the cash flow system respectively. Using a sample of 1767 firms listed in China between 2011 and 2016, we find that effective internal control has significantly promoted enterprises to assume social responsibilities. Meanwhile, effective internal control substantially improves the fulfillment of corporate social responsibility. This study overcomes the current situation that the two concepts of assumption and fulfillment of corporate social responsibility have not been distinguished in previous literature. We suggest that, in the economic transition period, the positive role of internal control in corporate governance should be promoted to protect the legitimate rights and interests of stakeholders; the adverse impact of the principal-agent relationship between shareholders and management on corporate governance should be avoided, building high-quality internal control; enterprises achieve steady and sustainable development process by the positive reputation value and robust external monitoring mechanism. This research is of practical importance to strengthen the subsequent construction of the internal control system and the long-term practice of corporate social responsibility.

Keywords: corporate social responsibility (CSR); assumption; fulfillment; rights and interests; sustainable development; control; comparatively (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://www.mdpi.com/2071-1050/10/11/4006/pdf (application/pdf)
https://www.mdpi.com/2071-1050/10/11/4006/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:10:y:2018:i:11:p:4006-:d:179972

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().