Political connections and corporate social responsibility: Political incentives in China

Abstract

To explore the motivations underpinning corporate social responsibility (CSR) decisions in China, a country characterized by extensive government intervention, this paper investigates whether building a good relationship with the government is a political incentive that is driving firms to conduct CSR by examining the effects of political connections on the latter. Our results indicate that politically connected firms exhibit better CSR. However, the effect is considerably more significant for firms with existing political relationships. Additionally, findings show that the effect is more prominent in firms for which political connections are more valuable, namely, non‐state‐owned enterprises, small firms, and firms operating in less market‐oriented cities, indicating that CSR can serve as a differentiation strategy to compete against other bidders. Dividing CSR activities into economic, environmental and social aspects, we find that the social‐based activities are more likely to be driven by political motivations. By categorizing CSR and political connections, this paper not only expands the scope of political CSR and renders the generated results that have been mixed together more distinguishable, but also provides a more precise understanding of the fundamental drivers of CSR in China from the perspective of resource exchange.

CEOs’ Poverty Experience and Corporate Social Responsibility: Are CEOs Who Have Experienced Poverty More Generous?

“…First, the study's sample was derived from China, but the relationship between CSR and the CEO's poverty experience could differ among other countries owing to cultural differences. Chinese culture and society are largely shaped by Confucianism, which is essentially a moral-political philosophy with Ren and Li as its core (Xu & Liu, 2020). Among them, Ren is described as benevolence, philanthropy and humaneness, which may be conducive to the formation of the poor's sympathetic and prosocial psychology.…”

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“…Since low firm growth would impede a firm's ability to engage in CSR, we expect a positive coefficient of firm growth. Fourth, following prior research (Xu & Liu, 2020), we controlled for firm performance, measured as net return on assets (ROA). We expect a positive coefficient of firm performance because firms with better financial performance more likely afford to engage in CSR (Tang et al., 2015).…”

“…China's policy of economic growth at all costs during the last 40 years has led to pressing social and environmental problems. Various malpractices of Chinese firms have been reported in recent years (Xu & Liu, 2020), such as unsafe toys, infant milk formula, and toxic pork (Lau et al., 2016). Therefore, it is time to balance economic growth with the social and environmental problems associated with it.…”

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“…Two reasons motivate the selection of Chinese firms as the empirical subject for this study. First, compared with developed economies with relatively stable rules and systems, China is in the process of transformation, and its laws and regulations are still being perfected (Xu & Liu, 2020), which creates much space for firms to implement CSI. Indeed, some studies point out that CSI is more common in China than in developed economies (Zhong et al, 2021a).…”