Is Corporate Social Responsibility Used to Mask Corporate Speculation? Evidence from Emerging China

Wenjuan Sui, Chunwei Yang and Huiyu Zhang
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Wenjuan Sui: Institute of City Strategy Studies, Guangdong University of Foreign Studies, Guangzhou 510006, China
Chunwei Yang: China International Engineering Consulting Corporation, Beijing 100048, China
Huiyu Zhang: School of International Studies, Zhejiang University, Hangzhou 310058, China

Sustainability, 2019, vol. 11, issue 12, 1-23

Abstract: Why do rational, profit-orientated firms generously engage in corporate social responsibility (CSR)? Our study explores the real motives of speculative firms for CSR engagement and the hidden causality behind it. Using national survey data of privately owned firms in China, we find that corporate speculation positively influences firms’ engagement in CSR, revealing that CSR is instrumental and that firms use it as a tool to mask their speculative activities by building their reputations and buying ‘leniency insurance’ against potential penalties. Further, the relationship between speculation and CSR is less pronounced in firms with political involvement, revealing that the effect of political involvement as an informal institution somewhat protects speculators from potential sanctions without a CSR premium. We also discovered that the relationship between corporate speculation and CSR—as well as the moderating role of political involvement—is less pronounced among developed regions, revealing that the development of formal institutions can restrict the instrumentality of CSR and the effect of political involvement. Such findings have important implications for CSR in emerging economies.

Keywords: corporate social responsibility; instrumental perspective; corporate speculation; privately owned firms; emerging economies (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
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