Business social norms from overseas and corporate social responsibility performance: evidence from China

ABSTRACT

This study examines the link between foreign business norms and corporate social responsibility (CSR) in China. Using the information of directors’ foreign background, we find that firms which hire directors with social norms from overseas engage more in CSR, and specifically realize better performance of shareholder responsibility, employee caring, supplier-customer relation, and environment protection. The positive relation is especially significant when directors’ foreign social norms obtained from high ranking CSR countries. Furthermore, firms hiring directors with social norms from overseas are more likely to have larger increase in their firm value. In addition, firms without directors with foreign social norms do better in the responsibility of charity, which does not have a significantly positive improvement on their firm value. These findings suggest that standard social norms from overseas are associated with positive CSR performance, and not at the expense of firm value.

KEYWORDS:

• Foreign business norms
• corporate social responsibility
• philanthropic giving
• firm value
• Chinese context

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Other literature, such as Moon and Shen (2010), also argued that since Chinese firms became more international, more and more firms adopted business rules and CSR standard of developed countries in view of the pressures from globalization.

2. We choose board directors as our research object mainly because their important roles in making decisions and improving firm performance in developing countries, since firm performance in these countries is widely known to be hampered by poor corporate governance (see, e.g., Syverson 2011; Jo and Harjoto 2012).

3. At the same time, China is also trying to make the world know about Chinese culture. For example, Chinese Festival has made itself a symbolic culture activity overseas, and China’s government has established several Confucius institutes as culture communication agencies in Korea, America, Japan, etc. See < The constitution of the People’s Republic of China> and < An overview of China’s foreign cultural exchange> for more about policies on foreign cultural exchange.

4. Hexun is a professional financial website in China. Its database covers global stock index, market data, executive characteristics data, and macro data, et al. The data of corporate social responsibility is obtained from the website: http://stockdata.stock.hexun.com/zrbg/Plate.aspx.

5. The CSMAR database is developed by GTA Information Technology, it is one of the main sources of Chinese economic data.

6. In recent years, many studies used ESG indices measuring firm-level CSR performance. Following Krueger (2015), Liang and Renneboog (2017), we use the data and ranking from Morgan Stanley Capital International’s (MSCI) Intangible Value Assessment (IVA) database to measure the CSR performance of each country.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [71872017];National Natural Science Foundation of China [71872014];National Natural Science Foundation of China [71772015];Fundamental Research Funds for the Central Universities of China [106112015CDJXY020010]; Beijing normal University Young Teachers Fund Project.