The social, environmental and ethical performance of Chinese companies:  Evidence from the Shanghai Stock Exchange

Hisham Farag; Qing-Wei Meng; Chris Mallin

doi:10.1016/j.irfa.2014.12.002

The social, environmental and ethical performance of Chinese companies: Evidence from the Shanghai Stock Exchange

Hisham Farag, Qing-Wei Meng, Chris Mallin

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Abstract

We investigate the social performance of Chinese listed non-financial companies in the Shanghai Stock Exchange. We design a comprehensive social, environment and ethics disclosure index (CSPDI) and assess the bi-directional relationship between corporate social performance and financial performance using the three-stage least squares (3SLS). We find that the mean value of CSPDI is 53% and high social disclosure is associated more with environmentally sensitive industries. Moreover, the index results show that little attention has been paid to ethical issues. Interestingly, we find that the better the financial performance, the worse the corporate social performance disclosure. This result is consistent with the managerial opportunism hypothesis. Finally, the results of the 3SLS estimation show that the causality between the two endogenous variables runs from financial performance to the corporate social performance. This suggests that the corporate social performance is determined by financial performance.

Original language	English
Journal	International Review of Financial Analysis
Early online date	20 Dec 2014
DOIs	https://doi.org/10.1016/j.irfa.2014.12.002
Publication status	E-pub ahead of print - 20 Dec 2014

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10.1016/j.irfa.2014.12.002

Farag_Meng_Mallin_Social_environmental_ethical_performance_International_Review_Financial_Analysis_2014
NOTICE: this is the author’s version of a work that was accepted for publication in International Review of Financial Analysis. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in International Review of Financial Analysis, DOI: 10.1016/j.irfa.2014.12.002. Eligibility for repository checked March 2015.
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title = "The social, environmental and ethical performance of Chinese companies: Evidence from the Shanghai Stock Exchange",

abstract = "We investigate the social performance of Chinese listed non-financial companies in the Shanghai Stock Exchange. We design a comprehensive social, environment and ethics disclosure index (CSPDI) and assess the bi-directional relationship between corporate social performance and financial performance using the three-stage least squares (3SLS). We find that the mean value of CSPDI is 53% and high social disclosure is associated more with environmentally sensitive industries. Moreover, the index results show that little attention has been paid to ethical issues. Interestingly, we find that the better the financial performance, the worse the corporate social performance disclosure. This result is consistent with the managerial opportunism hypothesis. Finally, the results of the 3SLS estimation show that the causality between the two endogenous variables runs from financial performance to the corporate social performance. This suggests that the corporate social performance is determined by financial performance.",

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AB - We investigate the social performance of Chinese listed non-financial companies in the Shanghai Stock Exchange. We design a comprehensive social, environment and ethics disclosure index (CSPDI) and assess the bi-directional relationship between corporate social performance and financial performance using the three-stage least squares (3SLS). We find that the mean value of CSPDI is 53% and high social disclosure is associated more with environmentally sensitive industries. Moreover, the index results show that little attention has been paid to ethical issues. Interestingly, we find that the better the financial performance, the worse the corporate social performance disclosure. This result is consistent with the managerial opportunism hypothesis. Finally, the results of the 3SLS estimation show that the causality between the two endogenous variables runs from financial performance to the corporate social performance. This suggests that the corporate social performance is determined by financial performance.

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The social, environmental and ethical performance of Chinese companies: Evidence from the Shanghai Stock Exchange

Abstract

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