Do Political Ties Cause Over-Investment in Corporate Social Responsibility? Empirical Evidence from Chinese Private Firms

Chan Xiong, Ke Zhang and Xiaoping Zhao
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Chan Xiong: Department of Marketing, School of Management, Wuhan Institute of Technology, Wuhan 430205, China
Ke Zhang: Department of Financial Management, School of Accounting, Shanghai Lixin University of Accounting and Finance, Shanghai 201209, China
Xiaoping Zhao: Department of Management and Organization, Shanghai Jiao Tong University, Shanghai 200030, China

Sustainability, 2020, vol. 12, issue 17, 1-14

Abstract: One of the most significant trends of firms in recent years is the investment growth in Corporate Social Responsibility (CSR) in China. CSR investment helps firms to create business value and develop strategic resources, whereas many firms ignore its optimal level. Extraordinary enthusiasm for CSR possibly leads to over-investment in CSR, which increases firms’ cost and has a negative influence on financial performance. We tried to explore the reasons why Chinese firms are so enthusiastic about CSR investment. Drawing upon the social exchange theories, we tested the relationship between political ties and over-investment in CSR, and examined how this relationship is moderated by the degree of resource competition. Based on a sample of 2304 private firms in China, we found that political ties have a positive effect on CSR over-investment. Our findings also suggested that the degree of resource competition positively moderates the relationship between political ties and over-investment in CSR.

Keywords: corporate social responsibility; over-investment in CSR; political ties; social exchange (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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