A new approach for addressing endogeneity issues in the relationship between corporate social responsibility and corporate financial performance

Wei Liu, Xuefeng Shao, Marco De Sisto and Wen Helena Li

Finance Research Letters, 2021, vol. 39, issue C

Abstract: This paper aims to reexamine the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP) using a panel dataset of Chinese listed firms. Previous studies obtained divergent empirical evidence on the CSR-CFP relationship due to unclear, incomplete, or inappropriate consideration of endogeneity issues. By introducing a Heckman-2SLS model, we comprehensively address the main endogeneity problems (i.e., sample selection bias, reverse causality, and unobserved heterogeneity) simultaneously within the CSR-CFP relationship. Results not only indicate a robust CSR-CFP relationship after correcting for endogeneity issues but also serve as a strong case for future investigation and correction of endogeneity issues.

Keywords: Corporate social responsibility; Corporate financial performance; Endogeneity; Heckman-2SLS model (search for similar items in EconPapers)
JEL-codes: C18 C36 L25 M14 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:39:y:2021:i:c:s154461231931205x

DOI: 10.1016/j.frl.2020.101623

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