Corporate Social Responsibility and Financial Performance: Evidence from Listed Firms in China

Research on the relationship between corporate social responsibility (CSR) and firm performance has grown exponentially over the past few decades, especially in developed economies. As one of the largest economies, the level of CSR development in China is relatively low and CSR-related topics have not been deeply studied until recent years. A few researchers examined a significant and positive link between CSR and financial performance among Chinese firms. However, the data source and methodology employed in prior studies had many limitations. This paper introduces a methodology to explore the relationship between CSR and financial performance with CSR Development Index issued by Chinese Academy of Social Sciences (CASS) since 2009, which is a more systematic CSR measure comparing to existing literature. With a sample consisting of 110 listed firms in China over the period of 2011–2014, fixed effects panel data analysis is adopted and tested to be the most appropriate methodology. Results using pooled OLS and random effects panel analysis are also included for better comparisons. The econometrics results show that there is no significant relationship between the two variables in the same year and in following years when incorporating lagged variables. In other words, CSR could not affect financial performance of Chinese listed firms. This conclusion indicates that the development and awareness of CSR in China still have much room for improvement.