Introduction
Literature review
Definition and measurement of Corporate Social Responsibility
Responsibility to Investors: | Responsibility to Employees: |
Create more profits, guarantee investors’ capital safety, and pay dividends or interests on time. | Provide competitive wages and good benefits, ensure employees’ safety, and provide abundant opportunities for employees’ growth and development. |
Responsibility to Customers: | Responsibility to Government: |
The rational investment in R&D, production, sales, and after-sales according to customers’ requirement in daily production activity. | The compliance of laws and regulations and the payment of taxes on time |
Responsibility to society: | |
Green production and charitable donation. |
Research based on government’s formulas
Stakeholders | Contribution Rate |
---|---|
Contribution to Government | (Tax Payments—Tax Returns)/Cash Inflow From Operating Activities |
Contribution to Employee | Cash Paid to Employee and for Employee / Prime Operating Revenue |
Contribution to Investor | Dividend and Interest Paid in Cash/ Prime Operating Revenue |
Contribution to Society | (Environment Expenditure + Donation + Sponsorship Fee)/ Prime Operating Revenue |
Stakeholders | Contribution Rate |
---|---|
Contribution to Country | (Tax Payments—Tax Returns)/ Prime Operating Revenue |
Contribution to Employee | Cash Paid to Employee and for Employee/ Prime Operating Revenue |
Contribution to Investor | Dividend and Interest Paid in Cash/ Prime Operating Revenue |
Contribution to Society | Public Welfare Paid in Cash/ Prime Operating Revenue |
Absolute Value | Indicator |
---|---|
Inner Stakeholders | Staff Training Expenditure |
Staff Social Security Expenditure | |
External Stakeholders | Donation |
Pollution Control Expenditure | |
Relative Value | Indicator |
Inner Stakeholders | Staff Training Expenditure/Revenue |
Staff Social Security Expenditure/Revenue | |
External Stakeholders | Donation/Revenue |
Pollution Control Expenditure/Revenue |
Scholar | Formula |
---|---|
Gao & Zhou (2008) | (Dividend Paid in Cash + Interest Paid in Cash + Cash Paid to Employee and for Employee + Cash Paid to Customer + Cash Paid for Goods Purchased and Labor Services Received + Actual Tax Paid)/ Prime Operating Revenue |
Zhang & Liang (2012) | (Dividend Paid in Cash + Interest Paid in Cash + Cash Paid to Employee and for Employee + Cash Paid to Customer + Cash Paid for Goods Purchased and Labor Services Received + Actual Tax Paid + Donation)/ Prime Operating Revenue |
Cao & Yu [2013] | (Tax Payments—Tax Returns + Cash Paid to Employee and for Employee + Dividend Paid in Cash + Interest Paid in Cash + Notes Payable + Accounts Payable)/ Prime Operating Revenue |
Weights endowed method
Item | Formula |
---|---|
Stockholder | Earnings per Share |
Net Asset Value per Share | |
Creditor | Interest Coverage Ratio |
Equity to Asset Ratio | |
Customer | COGSTS |
Sales Growth Rate in 3 Years | |
Supplier | Accounts Receivable Turnover |
Ratio of Cash and Accounts Payable | |
Employee | Wages and Welfare Ratio = Wages and Welfare /Net Profit |
Wages and Welfare Growth Rate | |
Government | Tax Ratio |
Tax Growth Rate in 3 Years | |
Weight | Stockholder’s Weight = Stock Equity/ Total Asset + (Subject Equity/ Total Asset) * (Dividend /(Stockholder + Creditor + Customer + Supplier + Employee + Government)) |
Creditor’s Weight = Loans/ Total Asset + (Subject Equity/ Total Asset) * (Interests /(Stockholder + Creditor + Customer + Supplier + Employee + Government)) | |
Other Stakeholders’ Weight = (Subject Equity/ Total Asset) * (Other Related Stakeholder’s Expenditure /(Stockholder + Creditor + Customer + Supplier + Employee + Government)) | |
CSR |
\( CSR={\displaystyle \sum_{n=1}^6}\left(CS{R}_i*{W}_i\right) \)
(CSRi is the indicator of stakeholder-oriented responsibility. Wi is stakeholder’s weight) |
Item | Formula |
---|---|
Stockholder | Dividend Paid in Cash/ Prime Operating Revenue |
Creditor | Interest Expense/ Prime Operating Revenue |
Employee | Cash Paid to Employee and for Employee / Prime Operating Revenue |
Customer | R & D/ Prime Operating Revenue |
Supplier | Cash Paid for Goods Purchased and Labor Services Received/ Prime Operating Revenue |
Government | (Tax Payments—Tax Returns)/ Prime Operating Revenue |
Community | (Donation + Sponsorship Fee)/ Prime Operating Revenue |
Negative Contribution Rate | - (Amercent Outlay + Compensation Expenses + Overdue Fine)/ Prime Operating Revenue |
CSR Performance |
\( CSR={\displaystyle \sum_{n=1}^8}\left(CS{R}_i*{W}_i\right) \)
(Wi is the recognition level of stakeholders in different life-cycles.) |
Definition and measurement of political connection
Motivation of Corporate Social Responsibility
Political connection and Corporate Social Responsibility
Internal utilitarian
External political pressure
Stakeholder saliency theory
Hypothesis development
Political connection and Corporate Social Responsibility
Political connection and stakeholder-oriented responsibility
Society orientation
Investor orientation
Customer orientation
Government orientation
Employee orientation
Method
Data sources
Industry | Number | Proportion |
---|---|---|
Mining Industry | 10 | 2.70 % |
Electricity, Heat, Gas and Water Production and Supply Industry | 3 | 0.81 % |
Real Estate | 34 | 9.19 % |
Construction Industry | 11 | 2.97 % |
Scientific Research and Technological Services | 2 | 0.54 % |
Agriculture, Forestry, Husbandry and Fishery | 7 | 1.89 % |
Wholesale and Retail Trade | 31 | 8.38 % |
Water Resources, Environment and Public Facilities Management | 1 | 0.27 % |
Health and Social Work | 1 | 0.27 % |
Culture, Sports and Entertainment | 3 | 0.81 % |
Information Transmission, Software and Information Technology Services | 16 | 4.32 % |
Industry | 240 | 64.86 % |
Hotels and Catering Services | 1 | 0.27 % |
Comprehensive Industry | 6 | 1.62 % |
Renting and Commercial Services | 4 | 1.08 % |
Dependent variables: CSR
Society orientation
Investor orientation
Customer orientation
Government orientation
Aggregative indicator of CSR
Independent variables: political connection
Control variables
Type | Name | Code | Description |
---|---|---|---|
Dependent Variables | CSR | CSR | (Donation + Sponsorship Fee + Funds + Environmental Expenditure + Cash Paid to Employee and for Employee + Dividend and Interest Paid in Cash + Prime Operating Cost + Actual Paid Taxes) / Prime Operating Revenue |
Society Orientation | SOCO | (Donation + Sponsorship Fee + Funds + Environmental Expenditure)*10,000 / Prime Operating Revenue | |
Employee Orientation | EMPO | Cash Paid to Employee and for Employee / Prime Operating Revenue | |
Investor Orientation | INVO | Dividend and Interest Paid in Cash / Prime Operating Revenue | |
Customer Orientation | CUSO | Prime Operating Cost/ Prime Operating Revenue | |
Government Orientation | GOVO | Actual Paid Taxes/ Prime Operating Revenue | |
Independent Variables | Political Connection | POLC | If chairman of the board or general manager is or had been government official, NPC delegates, CPPCC delegates, Party Congress delegates, et al., POLC equals to 1. If not, POLC equals to 0. |
Control Variables | Company Scale | SIZE | Log (Total Asset) |
Financial Efficiency | ROA | ROA | |
Duality | DUAL | If the general manager and chairman is one person, DUAL equals to 1. If not, Dual equals to 0. | |
Company Growth | GROW | The growth rate of main operation income | |
Fixed Asset Ratio | FIX | Fix Asset/ Total Asset | |
Year | YEAR | 7 year, Dummy Variable | |
Industry | IND | 15 industries, according to CSRC’s industry classification standard (2012) |
Model design
Empirical analysis
Descriptive statistics
Year | Non-political Connection | Political Connection | ||
---|---|---|---|---|
2008 | 277 | 74.86 % | 93 | 25.14 % |
2009 | 277 | 74.86 % | 93 | 25.14 % |
2010 | 273 | 73.78 % | 97 | 26.22 % |
2011 | 273 | 73.78 % | 97 | 26.22 % |
2012 | 272 | 73.51 % | 98 | 26.49 % |
2013 | 272 | 73.51 % | 98 | 26.49 % |
2014 | 271 | 73.24 % | 99 | 26.76 % |
Total | 1915 | 73.94 % | 675 | 26.06 % |
Samples | Political Connection | Non-political Connection | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Mean | SD | MIN | MAX | Mean | SD | MIN | MAX | Mean | SD | MIN | MAX | |
CSR | 1.001 | 0.433 | 0.396 | 3.816 | 1.061 | 0.457 | 0.396 | 3.816 | 0.980 | 0.423 | 0.396 | 3.816 |
SOCO | 6.597 | 12.714 | 0.000 | 81.619 | 8.515 | 15.174 | 0.000 | 81.619 | 5.845 | 11.528 | 0.000 | 81.619 |
EMPO | 0.111 | 0.095 | 0.006 | 0.540 | 0.094 | 0.082 | 0.006 | 0.540 | 0.117 | 0.099 | 0.006 | 0.540 |
INVO | 0.054 | 0.062 | 0.000 | 0.410 | 0.060 | 0.069 | 0.000 | 0.410 | 0.052 | 0.059 | 0.000 | 0.410 |
CUSO | 0.733 | 0.178 | 0.165 | 1.065 | 0.744 | 0.169 | 0.165 | 1.065 | 0.729 | 0.180 | 0.165 | 1.065 |
GOVO | 0.071 | 0.081 | −0.047 | 0.563 | 0.070 | 0.089 | −0.047 | 0.563 | 0.071 | 0.078 | −0.047 | 0.563 |
Sample | Political Connection | Non-political Connection | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
MEAN | SD | MIN | MAX | MEAN | SD | MIN | MAX | MEAN | SD | MIN | MAX | |
SIZE | 21.494 | 1.168 | 18.474 | 24.586 | 21.734 | 1.172 | 18.474 | 24.586 | 21.410 | 1.155 | 18.474 | 24.586 |
ROA | 0.065 | 0.069 | −0.161 | 0.338 | 0.069 | 0.064 | −0.161 | 0.338 | 0.064 | 0.070 | −0.161 | 0.338 |
DUAL | 0.229 | 0.420 | 0.000 | 1.000 | 0.187 | 0.390 | 0.000 | 1.000 | 0.244 | 0.429 | 0.000 | 1.000 |
FIX | 0.221 | 0.154 | 0.001 | 0.654 | 0.213 | 0.154 | 0.001 | 0.654 | 0.224 | 0.154 | 0.001 | 0.654 |
GROW | 0.244 | 0.938 | −0.796 | 7.766 | 0.241 | 0.937 | −0.796 | 7.766 | 0.244 | 0.939 | −0.796 | 7.766 |
Correlation analysis
CSR | SOCR | CUSO | EMPO | GOVO | INVO | POLC | INS | SIZE | ROA | DUAL | FIX | GROW | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
CSR | 1 | ||||||||||||
SOCR | 0.137***
| 1 | |||||||||||
CUSO | 0.130***
| −0.216***
| 1 | ||||||||||
EMPO | 0.192***
| 0.080***
| −0.282***
| 1 | |||||||||
GOVO | 0.414***
| 0.282***
| −0.441***
| 0.230***
| 1 | ||||||||
INVO | 0.424***
| 0.166***
| −0.208***
| 0.126***
| 0.449***
| 1 | |||||||
POLC | 0.067***
| 0.100***
| 0.037*
| −0.119***
| −0.010 | 0.045**
| 1 | ||||||
INS | −0.015 | −0.042*
| 0.043**
| −0.040**
| −0.102***
| −0.058***
| −0.010 | 1 | |||||
SIZE | 0.045**
| 0.003 | 0.083***
| −0.293***
| 0.044**
| 0.278***
| 0.124***
| 0.062***
| 1 | ||||
ROA | −0.079***
| 0.082***
| −0.299***
| −0.024 | 0.117***
| 0.019 | 0.033 | 0.063***
| 0.109***
| 1 | |||
DUAL | 0.008 | −0.004 | −0.019 | 0.081***
| −0.010 | −0.031 | −0.062***
| 0.061***
| −0.122***
| −0.001 | 1 | ||
FIX | −0.271***
| −0.089***
| 0.176***
| −0.026 | −0.269***
| −0.176***
| −0.033***
| −0.079***
| −0.058***
| −0.112***
| 0.025 | 1 | |
GROW | −0.048**
| −0.010 | −0.078***
| −0.110***
| −0.020 | −0.089***
| 0.006 | −0.014 | −0.130***
| −0.041**
| 0.007 | −0.076***
| 1 |
Regression analysis on political connection and CSR
CSR | SOCO | INVO | CUSO | GOVO | EMPO | |
---|---|---|---|---|---|---|
Hypotheses | H1 | H2a | H2b | H2c | H2d | H2e |
POLC | 0.058***
| 2.366***
| 0.002 | 0.014*
| −0.006*
| −0.014***
|
(0.019) | (0.665) | (0.002) | (0.007) | (0.003) | (0.003) | |
SIZE | −0.0120 | −0.459 | 0.011***
| 0.012***
| −0.002 | −0.025***
|
(0.012) | (0.288) | (0.001) | (0.003) | (0.001) | (0.002) | |
ROA | −0.567***
| 14.217***
| −0.000 | −0.757***
| 0.139***
| −0.023 |
(0.212) | (4.425) | (0.021) | (0.072) | (0.031) | (0.038) | |
DUAL | 0.036 | 0.044 | 0.001 | 0.004 | −0.002 | 0.002 |
(0.023) | (0.613) | (0.003) | (0.008) | (0.004) | (0.004) | |
GROW | −0.039**
| −0.348 | −0.006***
| −0.013**
| −0.005**
| −0.015***
|
(0.016) | (0.413) | (0.001) | (0.005) | (0.002) | (0.002) | |
FIX | −0.560***
| −6.131***
| −0.033***
| 0.111***
| −0.087***
| −0.003 |
(0.071) | (2.062) | (0.009) | (0.024) | (0.013) | (0.014) | |
YEAR | Yes | Yes | Yes | Yes | Yes | Yes |
IND | Yes | Yes | Yes | Yes | Yes | Yes |
R2
| 17.85 % | 7.29 % | 25.97 % | 27.36 % | 24.57 % | 26.43 % |
Observation | 2180 | 1790 | 2180 | 2180 | 2180 | 2180 |
Regression results on political connection and CSR
Hypotheses | Dependent Variable | Content | Regression Result |
---|---|---|---|
H1 | CSR | PC > NPC | PC > NPC(***) |
H2a | SOCO | PC > NPC | PC > NPC(***) |
H2b | INVO | PC > NPC | PC > NPC |
H2c | CUSO | PC > NPC | PC > NPC(*) |
H2d | GOVO | PC < NPC | PC < NPC(*) |
H2e | EMPO | PC < NPC | PC < NPC(***) |
CSR | SOCO | INVO | CUSO | GOVO | EMPO | |
---|---|---|---|---|---|---|
Hypotheses | H1 | H2a | H2b | H2c | H2d | H2e |
POLC | 0.017***
| 0.434***
| 0.001 | 0.005***
| −0.002**
| −0.004***
|
(0.004) | (0.158) | (0.001) | (0.001) | (0.000) | (0.000) | |
SIZE | −0.013 | −0.467 | 0.011**
| 0.011***
| −0.002 | −0.025***
|
(0.011) | (0.291) | (0.001) | (0.003) | (0.001) | (0.002) | |
ROA | −0.570***
| 14.295***
| −0.001 | −0.757***
| 0.139***
| −0.022 |
(0.212) | (4.418) | (0.021) | (0.072) | (0.031) | (0.038) | |
DUAL | 0.036 | 0.021 | 0.000 | 0.004 | −0.002 | 0.002 |
(0.022) | (0.617) | (0.002) | (0.008) | (0.003) | (0.004) | |
GROW | −0.039**
| −0.339 | −0.006***
| −0.013**
| −0.005**
| −0.015***
|
(0.016) | (0.415) | (0.001) | (0.005) | (0.002) | (0.002) | |
FIX | −0.564***
| −6.326***
| −0.033***
| 0.110***
| −0.087***
| −0.001 |
(0.070) | (2.069) | (0.009) | (0.024) | (0.013) | (0.014) | |
YEAR | Yes | Yes | Yes | Yes | Yes | Yes |
IND | Yes | Yes | Yes | Yes | Yes | Yes |
R2
| 17.94 % | 6.86 % | 26.00 % | 27.44 % | 24.67 % | 26.44 % |
Observation | 2180 | 1790 | 2180 | 2180 | 2180 | 2180 |