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Financial Performance Gaps and Corporate Social Responsibility

Xinming Deng () and Xianyi Long ()
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Xinming Deng: School of Economics and Management, Wuhan University, Wuhan 430072, China
Xianyi Long: School of Economics and Management, Wuhan University, Wuhan 430072, China

Sustainability, 2019, vol. 11, issue 12, 1-21

Abstract: Based on the behavioral theory of firm and prospect theory, we investigate how corporate social responsibility (CSR) activities will respond to underperformance in past and in future. Using samples of Chinese listed firms from 2011 to 2016, this paper found that CSR increases with the distance by which financial performance in the last year falls below goals and decreases with the distance by which expected financial performance will fall below targets. In addition, the future underperformance will weaken the effect of the past underperformance on CSR. Besides, the value of financial performance in the last year will weaken the impact of underperformance in the last year on CSR and strengthen the impact of underperformance in the next year on CSR. The findings suggest that future studies should take both value of financial performance and performance gaps into consideration to have a better understanding of organizational decisions and behaviors.

Keywords: backward-looking performance gap; forward-looking performance gap; the value of financial performance; CSR (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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