Corporate Social Performance, Firm Valuation, and Industrial Difference: Evidence from Hong Kong

Abstract

This study addresses two issues. First, does corporate social performance matter in Hong Kong. Second, if yes, is it relevant to some industries more than others. To answer these questions, we develop a corporate social performance index (CSP) to measure the quality of corporate social performance of major Hong Kong listed firms. The criteria are based on the OECD Principles of Corporate Governance. Using the 3-year period from 2002 to 2005, we find that firm valuation is positive and significantly associated with CSP. Interestingly, this relation matters less in China related firms and firms with a concentrated ownership structure. The results also show that CSP impacts firm valuation more positively when the firm is in the service sector. We further find that CSP is positively related to the market valuation of the subsequent year.

How do corporate social responsibility activities affect performance? The role of excess control right

“…Previous empirical research has also confirmed mixed results regarding the relationship between CSR and FP. The impact of CSR on FP has been found to be positive (Callan & Thomas, 2009;Cheung et al, 2013;Huang & Yang, 2014;Inoue & Lee, 2011;Kong, Liu, & Dai, 2014;Lins, Servaes, & Tamayo, 2017;Lo & Kwan, 2017;Reverte, Gómez-Melero, & Cegarra-Navarro, 2016), negative (Baird et al, 2012;Di Giulia & Kostovetsky, 2014;Lioui & Sharma, 2012;Masulis & Reza, 2015) or insignificant (Soana, 2011;Surroca et al, 2010). Grewatsch and Kleindienst (2017) proposed that the heterogeneity of the linkage between CSR and FP may, to a substantial degree, be explained with some moderators.…”

“…Moreover, cross‐cultural differences exist between Eastern and Western nations. For instance, the corporate cultures of Western markets have long valued charity activities, but charity activities have yet to see prominence in Asian markets (Cheung, Jiang, Mak, & Tan, ). Wei, Egri, and Lin () also proposed societal differences between Canada and Taiwan in the positive influence of CSR activities on corporate image and employee commitment.…”

“…Moreover, cross-cultural differences exist between Eastern and Western nations. For instance, the corporate cultures of Western markets have long valued charity activities, but charity activities have yet to see prominence in Asian markets (Cheung, Jiang, Mak, & Tan, 2013). Wei, Egri, and Lin (2014) Furthermore, the prevailing literature affirms that firms have concentrated ownership in most Asian markets (Claessens, Djankov, Fan, & Lang, 2002;Claessens, Djankov, & Lang, 2000;La Porta, Lopezde-Silanes, & Shleifer, 1999;La Porta, Lopez-de-Silanes, Shleifer, & Vishny, 2002;Shleifer & Vishny, 1997).…”

Chinese Consumers' Expectations of Corporate Communication on CSR and Sustainability

“…Much of this has focused on how corporations approach CSR in different markets and how their CSR practices are different from Western countries (Welford, , Cheung et al, ). Other areas of CSR research in China have also addressed the effects of CSR on financial performance and brand value (Bouvain et al, ; Cheung et al, ), Chinese stakeholder perceptions of CSR itself or companies' CSR activities (Welford et al, ; Ramasamy & Yeung, ; Wang & Juslin, ), and cultural differences related to CSR (Welford, ; Wong et al, ). When it comes to evaluating companies' CSR, Chinese consumers tend to care less about discerning companies' motives and care more about results.…”

“…Previous research on CSR has also identified differences between mainland China and Hong Kong. Positive CSR effects on market value were more evident among companies listed in Hong Kong, but such effects were found to be weaker among mainland Chinese‐related companies (Cheung et al, ). This is not surprising given Hong Kong's distinct political, economic, and social development characteristics (Welford, ).…”