Do corporate social responsibility activities enhance firm value? An empirical evidence from Taiwan

Abstract

In the past few decades, companies have begun to pay attention to the issue of whether companies that are engaged in CSR activities enhance firm value remains a subject of debate. From the perspective of agency theory, high-CSR companies can encounter poor financial performance and a reduction in firm value because of managers’ bad project selection. According to stakeholder theory, high-CSR companies face a positive relationship to financial performance and vament as a result of consideration for the benefits of stakeholders. This study collects CSR data from CommonWealth Magazine and examines how Taiwanese companies engaged in CSR activities affect corporate financial performance. The empirical finding shows that CSR is significantly positive to corporate financial performance. This result suggests that companies actively engaged in CSR activities bring a positive effect on firm value. Therefore, our evidence supports the stakeholder theory that high CSR companies benefit their stakeholders.

Impact statement

Recently, there has been a change in the way businesses operate, with enterprises beginning to prioritize issues such as environmental protection, social responsibility, and corporate governance. They coexist and prosper alongside these concerns. Corporate social responsibility is a broad concept of sustainable development, while ESG embodies the principles of how CSR is implemented. This study examines the impact of CSR activities on corporate financial performance among Taiwanese companies. The empirical findings show a significantly positive correlation between CSR and corporate financial performance, suggesting that companies actively engaged in CSR activities bring positive effects to firm value. The evidence supports the stakeholder theory, indicating that high CSR companies benefit their stakeholders. The empirical implications suggest that advocating for CSR could strengthen favorable relationships with stakeholders, thereby benefiting companies. In practice, companies dedicated to engaging in CSR activities can enhance performance and increase value. The research results imply that promoting CSR activities is an investment rather than a cost, urging companies to increase their involvement in CSR activities without hesitation. From an investor’s standpoint, endorsing companies’ efforts in CSR is essential, not only for shareholders’ profitability but also for overall sustainability. Policymakers should formulate comprehensive policies, providing incentives such as tax relief or support schemes to encourage companies to invest in CSR activities.

Keywords:

• Corporate social responsibility
• corporate performance
• firm value
• Tobin’s Q
• stakeholder theory

REVIEWING EDITOR:

• Caroline Elliott, University of Warwick, UK

SUBJECTS:

• Economics
• Finance
• Business, Management, and Accounting

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Research on how CSR contributes to company reputation, brand image, brand loyalty, customer purchase intention, and innovation development is widely discussed in management literature, such as (Kotler, 2005; Le, 2022; Le et al., 2021a, 2021c, 2021d; Zhu et al., 2014).

Additional information

Notes on contributors

Hung-Yu Chen

Hung-Yu Chen holds a Ph.D. in Management from Chaoyang University of Technology and currently serves as a part-time Assistant Professor in the Department of Finance at Chaoyang University of Technology. His research interests revolve around SME development issues, green finance, and commercial law.

Ming-Chin Lin

Dr. Ming-Chin Lin holds a Ph.D. in Commerce from National Chengchi University (NCCU) and currently serves as an associate professor in the Department of Finance, College of Management at Chaoyang University of Technology (CYUT). Her research interests revolve around asset pricing, market micro-structure, exchange rate determination.

Zong-Han Lin

Dr. Zong-Han Lin is an Assistant Professor in the Department of Finance at Chaoyang University of Technology in Taichung, Taiwan. His primary research interests lie in areas related to finance, including mutual funds, financial management, real estate, and sustainable finance.