Risk Governance & Control: Financial Markets & Institutions / Volume 9, Issue 4, 2019

THE RELATIONSHIP BETWEEN

CORPORATE SOCIAL RESPONSIBILITY
AND FIRM PERFORMANCE IN CHINA
Md. Jahidur Rahman *, Yu Fang **
* Corresponding author, Department of Accounting, Wenzhou-Kean University, China
Contact details: Department of Accounting, Wenzhou-Kean University, Daxue Road 88, Ouhai, Wenzhou Zhejiang Province, 325060, China
** Department of Accounting, Wenzhou-Kean University, China

Abstract
How to cite this paper: The purpose of this study is to investigate the relationship between
Rahman, M. J., & Fang, Y. (2019). The
relationship between corporate social
corporate social responsibility and firm performance in China. We
responsibility and firm performance in have used the sample of A-share listed firms from Shenzhen and
China. Risk Governance and Control: Shanghai Stock Exchange for the period 2011 to 2017. We used
Financial Markets & Institutions, 9(4), 41-
pooled ordinary least squares (OLS) regression as a baseline
48.
http://doi.org/10.22495/rgcv9i4p4 methodology. We find that corporate social responsibility has a
significantly positive effect on firm performance in China. Our
Copyright © 2019 The Authors results suggest that Chinese companies having better financial
This work is licensed under a Creative
performance undertake more CSR reporting. This paper contributes
Commons Attribution 4.0 International to the existing literature by investigating the effect of firm
License (CC BY 4.0). performance on CSR reporting of Chinese listed companies.
https://creativecommons.org/licenses/
by/4.0/
Keywords: Corporate Social Responsibility, Firm Performance,
ISSN Online: 2077-4303 Return on Assets, China
ISSN Print: 2077-429X

Received: 13.09.2019 Authors’ individual contribution: Conceptualization – M. J. R.;

Accepted: 29.11.2019 Methodology – M. J. R.; Software – Y. F.; Validation – Y. F.; Formal
Analyses – Y. F.; Investigation – Y. F.; Resources – Y. F.; Data
JEL Classification: M14, M41
DOI: 10.22495/rgcv9i4p4
Curation – Y. F.; Writing – Y. F. and M. J. R.; Supervision – M. J. R.

1. INTRODUCTION conjunction with ethical, eco-environment and other

factors (Jones, Comfort, Hillier, & Eastwood, 2005).
Nowadays social endeavours play crucial roles in Recently social endeavors of companies become one
company business decision-making processes since popular topic when talking about the company
they can improve companies’ competitive power so operation management.
that companies have the chance to survive in the For many companies, corporate social
present competitive market and be the winners. For responsibility is a kind of market tool to let the
companies, profit is the most important factor company’s competitive power be effective (Lin et al.,
because it stands for whether a certain company 2009). The result of a study done by Lin et al. (2009)
operates well and whether it can go further in the identifies that there is no positive relationship
future. The objective of social endeavors is to attract between CSR and FP in the short term. However, in
stakeholders, stimulate consumption and get profit the long term, the higher the company invests in
as much as possible (Levy, 1999). Among social CSR, the better its firm performance is. Apart from
endeavors, corporate social responsibility (CSR) is the relationship between CSR and profit, there is one
widely discussed and researched. thing needing to be cared about. Mishra and Suar
Lin, Yang, and Liou (2009) regard the social (2010) do a research aiming to explore the different
welfare as one main point of corporate social aspects of corporate social responsibility in India.
responsibility and the profitability of a company as Six stakeholders, that are employee, customer,
representative of firm performance (FP). The social investor, community, environment and supplier, all
welfare is described as companies’ methods to may change when the company gives some
appeal the attention from the outside. To some alternations to CSR.
extent, the appearance of corporate social Refer to those studies mentioned above, there
responsibility is to maintain companies’ business is still some knowledge gap that has not been filled
strategies and earn profit, in terms of money, as yet. For every company, operation management
much as possible. McWilliams and Siegel (2006) plays an important part in the process of decision-
define corporate social responsibility as a company’s making. Social endeavors belong to one of the
contribution to the society beyond the basic business strategies of companies to attract attention
requirement of government. CSR stands for a from the whole society. It is certain that the final

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 Risk Governance & Control: Financial Markets & Institutions / Volume 9, Issue 4, 2019

goal of social endeavors is to get profit. Corporate important position. He holds the view that for
social responsibility represents one part of companies, increasing corporate social responsibility
companies’ social endeavors. According to former is an essential strategy to attract the attention of the
researches, firm performance will be affected by society. The range of the definitions of CSR is like an
corporate social responsibility (Schiebel & umbrella since it covers different aspects of the
Pochtrager, 2003). Existing studies have proved the public. Different companies may behave variously
positive relationship between those two variables. In according to their corporate nature and market
this relationship, the firm is widely defined. strategy (Talvio & Välimaa, 2004). Weinstein (1995)
Researchers have studied this relationship in various agrees with that the demand of the community and
places, such as Taiwan, Thailand and India. However, public differs. As a result, companies’ corporate
very little research has been studied to identify the social responsibility activities will be managed and
correlation between corporate social responsibility changed accordingly. Even though recently
and firm performance in China. Therefore, here companies prefer to show their CSR achievements to
comes to the knowledge gap – the impact of CSR on their stockholders to appeal their investment rather
FP in China. than show profit (Elkington, 1997). In addition,
China and Taiwan both located in East Asia. Freeman (1984) mentioned that a successful
They may have some same characteristics in this company would like to get more by revealing
area. According to the research contraposing Taiwan corporate social responsibility than those profits.
done by Lin et al. (2009), corporate social However, the final goal of a business company is to
responsibility has a positive impact on firm get profit. Weinstein (1995) corroborates that
performance in the long term and no significant companies will think about their ethical principles
positive relationship in the short term. From those on account of interests. After all, it is not worthwhile
previous researches, one hypothesis can be to develop corporate social responsibility reputation
proposed: the satisfactory corporate social if the companies’ interest and profit are jeopardized.
responsibility can improve firm performance in both Refer to De George (1999), at the beginning, the
short and long term in China. distribution related to charitable activities is
The purpose of the research is to investigate classified as corporate social responsibility. There is
the relationship between corporate social no relationship between business operation
responsibility and firm performance in China. Our situation and CSR. Companies’ participation in the
research is based on a sample of 16,193 firm-year public is an integral step to get involved in the
observation. The observation period covers the years society. Later, corporate social responsibility
from 2011 to 2017. We used pooled ordinary least gradually becomes a link between responsibility and
squares (OLS) regression as a baseline methodology. interest. A company’s operation is connected to a lot
In our study, the CSR reporting index is considering of factors of public, such as economic situation,
as the dependent variable. CSR grade of companies social issues and environmental problems. (Enquist,
was directly collected from Hexun CSR dataset. ROA Johnson, & Skålén, 2006). It is defined as the
(Net Income over the average of beginning and business practices that pay attention to the public
ending assets) was seen as firm performance proxy. and social community (Kotler & Lee, 2008).
We find that corporate social responsibility has a Corporate social responsibility is a terminology
significantly positive effect on firm performance in describing a phenomenon that a company’s
China. Our results suggest that Chinese companies contribution towards the society exceeded what it is
having better financial performance undertake more regulated by the government and beyond the social
CSR reporting. and ethical requirements (McWilliams & Siegel,
In the following section, a literature review is 2006). It covers different areas of the whole society.
sum up from existing studies and a relative Customers, employees, employers and other public
hypothesis is proposed. In Section 3, the research issues are included in the concept of corporate
methodology is stated. In Section 4, we state the social responsibility (Mishra & Suar, 2010).
results of the research and do some discussions. The
last section stands for conclusion. 2.2. Firm performance

2. LITERATURE REVIEW AND HYPOTHESIS A great effort would be made by firms to obtain
DEVELOPMENT resources as much as possible (Barney, 1991).
Companies conquer resources based on their
2.1. Corporate social responsibility financial situation. At first, they would develop
resources to enjoy the advantage of sustainability.
Chakraborty (2015) does a research related to the Later they would change strategy to defend the
concept of corporate social responsibility on the economic influence caused by those resources.
(Lumpkin & Dess, 2001). A company’s success
basis of the phenomenon that CSR is widely defined.
cannot survive in a competitive market without an
Chandler (2001) also expresses that there is no
excellent financial performance (Galbreath & Shum,
specific concept meaning of corporate social
2012). It acts an important part in the process of
responsibility. In this society, people are supposed
companies’ actions of staying profitability and
to take charge of what they have done, especially for
sustainability. Lumpkin and Dess (2001) suggest that
businessmen. For those businessmen, their
good firm performance will result in the increment
companies should be responsible for their
of companies’ market share and the achievement of
management decision impact on the society as well.
brand recognition. A firm with well-functioning
Weinstein (1995) believes that corporate social
situation is better than a firm without a nice
responsibility puts the relationship between a
functional structure, especially when talking about
company’s activities and social problems in an
those inactivity and existing conflicts (Jensen, 1993).

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2.2.1. The impact of corporate social responsibility of the study of Chaisena and Ussahawanitchakit
on firm performance (2016) shows that environmental element, which is a
sub-factor of corporate social responsibility, do not
Lynes and Andrachuk (2008) suggest that the have a significant relationship with firm
relationship between corporate social responsibility sustainability, stockholder trust and company
and firm performance is influenced by many factors, credibility.
such as environment, society-related issues,
employment problems and so on. An outstanding 2.2.4. CSR towards stockholders and firm
corporate social responsibility pushes certain performance
companies to a higher level. Jones et al. (2005) also
expressed that the meeting of ethics, unemployment Sial, Zheng, Khuong, Khan, and Usman (2018)
rate and eco-environment result in corporate social describes the relationship of some chosen
responsibility. In this situation, environment factor companies in China. The basic motivation of a
acts an active role when talking about the company is to let cost to the lowest level and gain
motivations of the companies to achieve better firm profit as much as possible. Profit contains many
performance. aspects, such as stockholders, society, environment
and so on. Different positions of people can be
2.2.2. CSR towards employees and firm involved in a company’s corporate social
performance responsibility. For instance, suppliers, customers,
employees, chief executive officers, board members
According to Renn (2001), there are four systems and others not mentioned belong to the party that
that will influence the companies’ performance. The will be influenced by CSR both directly and
first one is the market. The market has its own rules indirectly. What’s more, those factors are connected
and laws and regulates itself. Every company is to each other relatively. Chaisena and
supposed to commit to those restrictions. It is worth Ussahawanitchakit (2016) mainly focus on 838
mentioning that the natural character of the market Thailand companies of ISO 14000. Those companies
is to obtain benefits. As a result, under the push of are competing with each other in the same
market, companies will aim to the strategy of profit marketing environment – Thailand was in a dynamic
first. In addition, Renn (2001) suggests that every economic crisis of that time. In short, corporate
company’s development of policies is based on the social responsibility, to some extent, have a positive
official guidance and policies of that day. The effect on firm performance, which is represented by
property of the government and official sustainability, credibility and stockholder trust in
organizations will impact the decisions making by the research process.
companies. Moreover, not only scientific factors will
cause the change of companies’ final management 2.2.5. CSR towards outsiders and firm performance
operation decisions for corporate social
responsibility, but also social system. As for social A little different from the study of Chaisena and
system, the contribution of one company to Ussahawanitchakit (2016), Mishra and Suar (2010) do
corporate social responsibility is influenced by the a research explaining the relationship between
combination of science, policy and market. To sum corporate social responsibility and firm performance
up, the responsible behaviors of insiders of in India. Mishra and Suar (2010) divide the firm
companies, which means employees and those performance into two parts, financial performance
decision-makers, will influence the financial and non-financial performance. From the
outcome of a company. perspective of stakeholders, the cause of displaying
companies’ CSR reports is to earn high social
2.2.3. CSR towards environment and firm reputation. The public is sensitive to a company’s
contribution to the society. A great reputation can
performance help stockholders to accelerate the accumulation of
confidence about companies’ performance (Lee,
Renn (2001) strongly points out that companies, in
2008). Outsiders are the joint name of investors,
this situation which are airline industry companies,
customers and suppliers. If customers are
seek to attract profit, like improving firm
disappointed about the companies, investors will
performance, by improving their corporate social
reduce investment. The feedback of customers
responsibility, especially environmental factors.
affects investors’ decision-making process of giving
Lynes and Andrachuk (2008) hold the idea that
patronage or not (Berman, Wicks, Kotha, & Jones,
social responsibility will affect the motivation of
1999). In addition, the effect of suppliers gradually
companies. The research of the environmental
becomes a necessary part of firm performance
responsibility of corporate social responsibility of
(Prahalad & Hamel, 1990). A friend relationship
SAS puts the study of correlation between CSR and
between suppliers and companies helps companies
FP to a higher level. Chaisena and
to establish high reputation so that they have the
Ussahawanitchakit (2016) create a conceptual model
chance to attract more attention from the society. In
related to the relationship between corporate social
India, the beverages of Coca-Cola and Pepsi were
responsibility. In this relationship, stockholder,
announced that pesticide was one of the contents.
credibility and sustainability are the basic elements
After this explosive news, those two companies’
that influence corporate social responsibility.
sales both decreased obviously (Financial Express,
Among corporate social responsibility, four
2006). Based on the above discussion, we
responsibilities are listed in the research report done
hypothesized that:
by Chaisena and Ussahawanitchakit (2016). They
tough upon different areas, including economy, H1: Firm performance has a positive effect on
moral, environment and ethics. However, the result CSR reporting.

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3. RESEARCH METHODOLOGY (Net Income over the average of beginning and

ending assets) was seen as firm performance proxy.
3.1. Study design
3.4. Measuring control variables
There were four basic concepts of study design of
our research – research nature, research approach, In the research process, we set five control variables
and research design and research strategy. The based on a research done by Sial et al. (2018). The
research nature was descriptive since it aims to first one was CEO duality, which meant whether one
figure out the relationship between corporate social person held both the position of Chair and CEO. If
responsibilities. The study explained what happened same person held the two positions, “ceoduality”
between CSR and FP in the Chinese market. The would record 1, otherwise 2. Second was board size
relationship between CSR and FP in China had not standing for the number of directors of the
been conducted specifically. Deductive approach company’s board. It was recorded as “boardsize”.
was applied in this study. If the CSR of one company The numbers of board meeting held in the limitation
increases, its FP will also increase. A theory has of one year recorded as “bfm”. The fourth control
already concluded from the former researches. On variable was “duration”. It was calculated by total
the basis of the theory, hypothesis is proposed: the debt over total assets of one company. The last
enhancement of companies’ investment in CSR will control variable was “firm size” – the total assets of
result in the improvement of firm performance in one certain company.
China. Then, the research would collect related data
and to test whether the outcome confirms or rejects
3.5. Sample
the hypothesis. Quantitative research methodology
was applied since the research collected data, in
Firms with A-share listed on the Shanghai and
terms of number, and analysed the numeric outcome
to do further research the impact of CSR on FP in Shenzhen Stock Exchanges were chosen. We
China. The experiment was used as the research collected related data from the CSMAR database,
strategy. In this situation, we chose some companies whose whole name is China Stock Market and
listed on the Shanghai and Shenzhen Stock Accounting Research database. Companies’ ROA,
Exchanges. They must be A-share companies. Sample CEO duality, board size, board meeting frequency,
companies were chosen because of the large number debt asset ratio and firm sizes of 2015 were
of companies. In this research, some criteria need to collected from CSMAR (Sial et al., 2018). Hexun, as
be met when choosing companies. First, the the first vertical Chinese website for financial
company must be listed on Shanghai and Shenzhen information, would calculate a company’s grade of
Stock Exchanges from 2011 to 2017 respectively. corporate social responsibility by analyzing its
Second, companies were supposed to be selected stockholders, employees, and environment and
randomly. Companies with different level of outsiders factors. 16,193 pieces of data were chosen
corporate social responsibility grade all need be randomly as sample after dropping companies
listed without special purpose. Last but not least, the without specific data.
companies were both ranked in Hexun and CSMAR
so that the possibility of missing data was relatively 3.6. Regression model
low. Data related to this research was obtained from
CSMAR database, Hexun and company’s official To find out the relationship between corporate
website directly. After collecting data, we used social responsibility and firm performance, we
pooled ordinary least squares (OLS) to test the applied the equation of Sial et al. (2018) as our
Model I estimated through prior literature. The research model. Pooled ordinary least squares (OLS)
research used longitudinal study that collected a were used to check the impact of CSR on FP in
sequence of information of each selected Chinese China.
company varying from 2011 to 2017.
𝑛
3.2. Measuring CSR (object of the study) (1)
FP = 𝛽0 + 𝛽1 𝐶𝑆𝑅 + ∑ 𝛽𝑛 𝐶𝑉 + 𝜀
The aim of the research was to describe the 𝑖=1
relationship between CSR and FP in China. In this
research, corporate social responsibility is regarded FP refers to firm performance (ROA). CSR refers
as an independent variable. The definition of to the total grades of companies’ corporate social
corporate social responsibility is companies’ responsibility reported by Hexun. CV stands for
contribution to the society that is more than they are those control variables – they are CEO duality, board
required (McWilliams & Siegel, 2006). It involves size, board meeting frequency, debt asset ratio and
many aspects of the whole society, such as firm sizes.
customer, employee, employment and so on (Mishra
& Suar, 2010). 4. RESULTS AND DISCUSSIONS
3.3. Measuring FP (treatment of the object) 4.1. Descriptive statistics
In this relationship, firm performance was regarded Table 1 presented the descriptive statistics. In total,
as a dependent variable. Refer to the hypothesis, the 16,193 pieces of data of companies from 2011 to
change of CSR will cause the change of FP. To put 2017 are regarded as input data. The average level of
the dependent variable to a specific indicator, ROA ROA is 0.0266 and ROA’s standard deviation is

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0.1437. When talking about corporate social year is 9.9321 times. There is one company having
responsibility, the mean value of CSRgrade is board meetings 57 times a year. However, there is
25.7833 with a standard deviation of 17.8851. The also one company holding meetings only 1 time. The
highest CSR grade is 90.87. The lowest is -18.17. Ceo average of Debt Asset ratio (DARatio) is 0.4193.
duality’s median is 2. In this situation, if the position Among those 16,193 pieces of data, the highest
of Chair and CEO are held by different persons, 2 is DARatio is 294.7863. The lowest is -0.0178. FirmSize
counted. On average, there are 8.6552 directors on is total assets captured by on certain company. The
board of one company. Also, the mean number of average is 1.61e+10. For firm size, the maximum is
times of board meetings held in the limitation of one 1.86e+13 with a minimum of 2,585,575.

Table 1. Descriptive statistics

Variable ROA CSRgrade CeoDuality BoardSize BMF DARatio FirmSize

Mean 0.0266 25.7833 1.7285 8.6552 9.9321 .4193 1.61e+10
Median 0.0215 22.07 2 9 9 0.3662 2484142508
Std. Dev. .1437 17.8851 0.4447 1.7586 4.1394 2.3484 2.13e+11
Minimum -6.9938 -18.17 1 0 1 -0.0178 2,585,575
Maximum 14.7011 90.87 2 20 57 294.7863 1.86e+13
Count 16,193 16,193 16,193 16,193 16,193 16,193 16,193
Notes: ROA = return on assets (Net Income over the average of beginning and ending assets); CSRgrade = companies’ final grade
of corporate social responsibility given by Hexun; CeoDuality = whether one person held both the position of Chair and CEO, yes - “1”,
no - “2”; BoardSize = the number of directors of the company’s board; BMF = the number of board meeting held in the limitation of one
year; DARatio = Debt Asset ratio (total debt over total assets); FirmSize = the total assets of one certain company.

4.2. Correlation multicollinearity (Gujarati, 2009). By observing the

correlation of those variables through Table 2, we
A certain theory states that there is no strong find the biggest coefficient one is 0.166 and the
relationship between independent variables when smallest is 0.000. They are both less than 0.8. Those
the correlation coefficient is larger than 0.8. In other independent variables won’t influence each other
words, if the coefficient of correlation is less than respectively. As a result, the multicollinearity
0.8, there is no need to consider about problem will not influence the result of the research.

Table 2. Correlation

ROA CSRgrade CeoDuality BoardSize BMF DARatio FirmSize

ROA 1
CSRgrade 0.088** 1
CeoDuality -0.025** 0.066** 1
BoardSize -0.005 0.166** 0.175** 1
BMF -0.030** 0.026** -0.000 -0.011 1
DARatio -0.162** -0.019* 0.017* 0.001 0.008 1
FirmSize -0.005 0.080** 0.031** 0.180** 0.029** 0.010 1
Notes: * = p < 0.05,** = p < 0.01.

4.3. Main results of the research is to describe the relationship

between CSR and FP in China. Prior researches have
OLS regression results are represented in Table 3. done before hold the opinion that the result is
P-value of ROA and CSRgrade is 0, which expresses inconclusive. In this situation, researchers report
the corporate social responsibility’s influence on various types of relationship – negative, positive and
firm performance. It is verified that there is a neutral (Lin et al., 2009). To some extent, the
significantly positive relationship between CSR and different variable operations result in the various
FP because p < 0.05. The result of our study is results. Those control variables, which are CEO
consisted of former researches (Lin et al., 2009; duality, Board Size, Board Meeting Frequency, Debt
Mishra & Suar, 2010; Schiebel & Pochtrager, 2003). Asset Ratio and Firm Size, are connected to the four
The purpose of our research is to describe the elements that corporate social responsibility
impact of CSR on FP in China. The hypothesis is that towards respectively. Those four elements as listed
in China, the enhancement of companies’ CSR can above are employees, employment, outsiders and
result in the improvement of companies’ FP. The stockholders.
positive OLS regression result supports the Standing at the perspective of stockholders, a
hypothesis and meets the purpose of the research. company’s social reputation plays an important part
According to the literature review, corporate during their decision-making process. Corporate
social responsibility has a positive effect on firm social responsibility grade appealed by Hexun would
performance (Zapotoczny, 2012). The results of OLS influence their decisions. Different collaborators
regression model show that outsiders, which are in connected to companies would make a refection
terms of suppliers, customers and investors, can towards the grade of CSR (Den Hond, de Bakker, &
influence a company’s financial outcome. In Neergaard, 2016). The board structure of a certain
addition, the regulation of the government would company establishes the confidence of employees as
limit the exertion of companies’ corporate social well. Additionally, companies’ attention on
responsibility. Compared to the research of Sial et al. environment earns great favor from the whole
(2018), our research studies the influence of society so that people would prefer them when
corporate social responsibility in China. The purpose people are in a conjunction of choose which

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company (Jones et al., 2005). A great corporate to a higher level (Levy, 1999). For employees, if
social responsibility can leave an excellent companies have better CSR behaviours, their
impression on the companies’ stockholders, employees would do their jobs harder based on the
outsiders and employees. Their influence is mutual. push of enterprise sense of honor. Companies’
Besides, the process of dealing with environmental contribution towards employees can motivate them
problem of companies decides a company’s and cause an increment of companies’ profitability
reputation and has the change to push companies’ (Renn, 2001).
economic outcome, which is interred of profitability

Table 3. Firm performance and corporate social responsibility

Source SS df MS Number of obs. = 16,193

Model 11.8860902 6 1.98101504 F (6, 1218) = 99.46
Prob > F = 0
Residual 322.401025 16,186 0.01991851 R-squared = 0.0356
Adj R-squared = 0.0325
Total 334.287115 16,192 0.02064520 Root MSE = 0.14113
Coef. Std. Err. t P>|t| [95% Conf. Interval]
CSRgrade 0.0007273 0.0000631 11.53 0.000 0.0006037 0.0008509
CeoDuality -0.0082412 0.0025352 -3.25 0.001 -0.0132106 -0.0032719
BoardSize -0.0012162 0.000658 -1.85 0.065 -0.002506 0.0000736
BMF -0.0010718 0.0002682 -4.00 0.000 -0.0015975 -0.0005461
DARatio -0.0097697 0.0004725 -20.68 0.000 -0.0106959 -0.0088435
FirmSize -4.51e-15 5.30e-15 -0.85 0.395 -1.49e-14 5.89e-15
_cons 0.0474534 0.0071652 6.62 0.000 0.0334088 0.0614981
Notes: OLS regression model is used to describe the relationship between CSR and FP.

4.4. Limitations performance in China by focusing on four elements

that CSR towards. Those four elements are
First of all, Waddock and Graves (1997) state that it stockholders, environment, employees and
is difficult to measure a company’s corporate social outsiders. Outsiders are those people not in the
responsibility. Our research directly collects from company but related to the profitability of the
official website Hexun directly. The sample may be company. They are customers, investors and
not representative enough to stand for all suppliers in this study. One conclusion can be
companies in China. Moreover, some small concluded is that companies with higher corporate
companies not listed on the Shanghai and Shenzhen social responsibility can result in better firm
Stock Exchange are not studied specifically. Second, performance, which is measured in terms of
we did not sort selected companies into different profitability. The research has highlighted the state
industry types. Industry type may influence the of CSR in one company. Companies are supposed to
result of the effect of CSR on FP (Lin et al., 2009). improve their contribution to corporate social
responsibility when managers are in the process of
4.5. Reliability and validity decision making.
Our research focuses on the influence of
Companies’ data is collected from the CSMAR corporate social responsibility on firm performance
database, Hexun and the company’s official website in China. The profitability, which is measured in
directly, which is certified by governments and terms of return on assets (ROA), will increase
authoritative organizations. Therefore, it ensures the according to the increment of company donation.
reliability of research. Those data won’t change even Furthermore, a company with obvious growth rate of
if other researchers are going to collect them. Since donation tends to be accompanied by high yield
the data is doubtless and specific, researcher bias development. The more Chinese companies invest in
and participant error do not exist in the research. corporate social responsibility, the better its firm
Sample companies do not make any response to this performance is. According to Sial et al. (2018), for
research. In addition, we, the researcher, check the Chinese companies, CSR of companies is still waiting
calculation and comparison process twice. The for development. Some Chinese companies get
possibility of researcher error is extremely small. confused when facing the problem of corporate
Overall, our research is free from reliability social responsibility. It is necessary for those
problems. companies to improve their corporate social
The research describes the relationship between responsibility for both profit and sustainable
corporate social responsibility and firm performance development purposes. However, our paper is
in China. It is demonstrated through the limited by some factors. First, CSR grade is different
establishment of internal validity. CSR represents depending on the measurement. Second, industry
the contribution of a company. Good CSR will attract types may influence the result of the study. Last but
stakeholders, stimulate consumption, motivate not least, ROA, which is the fire performance
employees and get profit for companies so that it indicator in our study, restricts the dependent
causes the increment of firm performance (Levy, variable. For example, Tobin’s Q can be also
1999). regarded as firm performance indicator.
The study of the relationship in China remind
those Chinese companies that if they want to
5. CONCLUSION
improve their market share and get recognition from
the whole society, it is necessary to pay attention to
In this research, we have described the relationship
corporate social responsibility. This research is
between corporate social responsibility and firm
based on empirical studies in China. Additionally,

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 Risk Governance & Control: Financial Markets & Institutions / Volume 9, Issue 4, 2019

Chinese management can have the chance to know contributes to the literature on finding aspects that
about the great influence of CSR on FP. During the will cause the change of firm performance in China.
decision-making process, operation managers can do In addition, because of the limitation of the industry
some decisional reflections about improving the type in our research, further research can be done to
company’s contribution to society to face the explore the impact of CSR on FP in China or other
increasing competitive market environment. The countries in the same industry.
research identifies the influence of CSR, which

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