Sub-National Institutional Contingencies and Corporate Social Responsibility Performance: Evidence from China

Shahid Ali, Junrui Zhang, Muhammad Usman, Farman Ullah Khan, Amir Ikram and Bilal Anwar
Additional contact information
Shahid Ali: School of Management, Xi’an Jiaotong University, Xi’an 710049, China
Junrui Zhang: School of Management, Xi’an Jiaotong University, Xi’an 710049, China
Muhammad Usman: Division of Computational Mathematics and Engineering, Institute for Computational Science, Ton Duc Thang University, Ho Chi Minh City 700000, Vietnam
Farman Ullah Khan: School of Management, Xi’an Jiaotong University, Xi’an 710049, China
Amir Ikram: Institute of Business & Management, University of Engineering & Technology, Lahore 54000, Pakistan
Bilal Anwar: Department of Management Sciences, Bahria University Lahore Campus, Lahore 54000, Pakistan

Sustainability, 2019, vol. 11, issue 19, 1-21

Abstract: This study investigates the relationship between sub-national institutional contingencies and corporate social responsibility performance (CSRP). Sub-national institutional contingencies (SNICs) play a moderating role in the link between CSRP and corporate financial performance (CFP). Using data from all A-share Chinese companies listed on the Shenzhen and Shanghai exchanges for the period 2010 to 2015, ordinary least square (OLS) regression was used as a baseline methodology to draw inferences from the data. The study uses propensity score matching (PSM) to confirm the robustness and to tackle the possible issue of endogeneity. We find reliable evidence that SNICs have a positive and significant effect on CSRP. This positive relationship is more pronounced in cross-listed companies as compared to state-owned enterprises (SOEs) and in companies located in the more developed region. Moreover, SNICs moderate the positive relationship between CSRP and CFP. The relationship is stronger in firms that are non-SOEs, are non-cross-listed, and are from less-developed regions as compared to their counterparts. The findings provide implications for regulators and individual companies. Investment in corporate social responsibility (CSR) helps companies to achieve their primary objective (i.e., financial performance). With respect to practical implications, the study indicates that policymakers, executives, and managers should refrain from “one size fits all” CSR policies. Instead, they need to simultaneously evaluate the effects of regional development, cross-listing, and ownership characteristics. Considering weak social performance by firms that are from less developed regions, are non-cross-listed, and that are non-SOEs, policymakers and the government should improve information transparency and the regulatory framework, and provide these firms with incentives. This study also provides insights for other emerging economies, especially those going through extraordinary government interventions.

Keywords: subnational institutional contingencies (SNICs); corporate social responsibility performance; corporate financial performance; institutional theory; China (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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