Relationship between Corporate Social Responsibility and Financial Performance in the Mineral Industry: Evidence from Chinese Mineral Firms

Abstract

This paper examines the relationship between Corporate Social Responsibility (CSR) and Corporate Financial Performance (CFP) using panel data for 228 Chinese mineral listed firms from 2010 to 2013 with Pooled Least Squares regression analysis. Our study considers five different sublevel CSR issues-shareholder responsibility, employee responsibility, environmental responsibility, public responsibility, and supplier, customer and consumer responsibility-in capturing the effects of CSR elements on CFP. The estimation results show the different effects of each sublevel CSR issue on CFP. Overall, shareholder, employee responsibility, environmental responsibility, supplier, customer and consumer responsibility have significant relationships with CFP, which are the stakeholders who have the closest linkage with firm operations. Meanwhile, public responsibility outside the firm does not show significant interaction with CFP, which is why many mineral firms ignore the public interest and this leads to conflicts. Shareholder responsibility has the most significant positive effect on CFP. Supplier, customer and consumer responsibility and environmental responsibility usually have negative effects on CFP as costs increase. Moreover, all 228 listed mineral firms that were selected in this paper have been classified into five sub-sectors: the extractive industry, metal fabrication OPEN ACCESS Sustainability 2014, 6 4078 industry, oil and gas industry, gas and water-related industry, and oil-producing equipment industry, based on the Industry Classification Benchmark (ICB). Our study shows that the differences in the relationship between CSR and CFP for five sublevel industries are due to industry characteristics. If the government wants to solve these conflicts and positively encourage firms to adopt CSR, it is necessary to create a mining development environment whereby firm profits are closely tied to CSR.

A Longitudinal Study of the Impact of Corporate Social Responsibility on Firm Performance in SMEs in Zambia

“…The positive effect of CSR on financial performance is consistent with many studies conducted in Western, Asian, and other countries (e.g., [4,[16][17][18]43]). Additionally, in the context of Zambia, Choongo et al [20] established that SMEs are motivated to engage in CSR for financial benefits.…”

“…While some studies also show negative or neutral effects, overall, extant literature postulates that CSR impacts firm performance positively. Pan, Sha, Zhang, and Ke [18] observed that employee responsibility and environmental responsibility have significant positive relationships with corporate financial performance. Lee, Herold, and Yu [55] suggested that SMEs are motivated to pursue CSR activities when they perceive a business benefit and value for the company.…”

“…There has been an increase in CSR studies (e.g., [16][17][18][19][20]). Despite the increase in research on CSR, there is still no generally agreed definition of CSR [21], as a result there is an ambiguous use of the terminology [22].…”

The Impact of Corporate Social Responsibility on Firm’s Profitability- a Case Study on Maharatna Companies in India

“…The result showed that there is a positive correlation between CSR and CFP. Pan et al (2014) assessed the relationship between CSR and Corporate Financial Performance (CFP) of 288 Chinese mineral listed firms from 2010-2013 by using Pooled Least Square Regression analysis. They have considered CSR issues in five different sub issues and out of them shareholder responsibility, employee responsibility, supplier, customer responsibility have significant relationship with CFP.…”

Using HLM to Study the CSR Information Disclosure-the Evidence by Chinese Manufacturing Companies in China

“…In turn, China is rapidly becoming a key player in the global market, and what China does in the realm of CSR reporting will affect many companies around the world through the global supply chain. There have been many studies that try to identify the drivers of CSR reporting and practice, including those focused on corporate reputation, brand value, and financial performance [1][2]. Reputation is a very important signal to the public about a company's products, jobs, and strategies in a competitive market.…”