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Corporate Social Responsibility Investment And Social Objectives: An Examination On Social Welfare Investment Of Chinese State Owned Enterprises

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  • Hong Bo
  • Tao Li
  • Linda A. Toolsema

Abstract

We apply the theory of corporate social responsibility to analyse social welfare investment undertaken by Chinese State Owned Enterprises (SOEs). We present a simple theoretical model to illustrate how the presence of social objectives in the firm's objective function changes its investment behaviour. Our theoretical model accommodates special features of Chinese SOEs, whose social welfare investment is driven by both social objectives and profit concerns. The model is then tested using a panel of Chinese enterprises during the period 1995-1999. The empirical analysis indicates that despite of the corporatization reform social welfare investment undertaken by Chinese SOEs is still inefficient due to the lack of profit concerns, suggesting that social objectives still dominate profit concerns in motivating the SOEs' social welfare investment. However, we do obtain clear-cut evidence showing that social objectives become less important as time progresses. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 Scottish Economic Society.

Suggested Citation

  • Hong Bo & Tao Li & Linda A. Toolsema, 2009. "Corporate Social Responsibility Investment And Social Objectives: An Examination On Social Welfare Investment Of Chinese State Owned Enterprises," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(3), pages 267-295, July.
  • Handle: RePEc:bla:scotjp:v:56:y:2009:i:3:p:267-295
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    References listed on IDEAS

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    1. Navarro, Peter, 1988. "Why Do Corporations Give to Charity?," The Journal of Business, University of Chicago Press, vol. 61(1), pages 65-93, January.
    2. Bai, Chong-En & Li, David D. & Tao, Zhigang & Wang, Yijiang, 2000. "A Multitask Theory of State Enterprise Reform," Journal of Comparative Economics, Elsevier, vol. 28(4), pages 716-738, December.
    3. Whited, Toni M, 1992. " Debt, Liquidity Constraints, and Corporate Investment: Evidence from Panel Data," Journal of Finance, American Finance Association, vol. 47(4), pages 1425-1460, September.
    4. Michael C. Jensen, 2010. "Value Maximization, Stakeholder Theory, and the Corporate Objective Function," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 32-42.
    5. repec:elg:eechap:1488_7 is not listed on IDEAS
    6. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    7. Tirole, Jean, 2001. "Corporate Governance," Econometrica, Econometric Society, vol. 69(1), pages 1-35, January.
    8. David P. Baron, 2001. "Private Politics, Corporate Social Responsibility, and Integrated Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 7-45, March.
    9. Edward X. Gu, 2002. "THE STATE SOCIALIST WELFARE SYSTEM and the POLITICAL ECONOMY OF PUBLIC HOUSING REFORM IN URBAN CHINA," Review of Policy Research, Policy Studies Organization, vol. 19(2), pages 179-211, June.
    10. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
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    Cited by:

    1. Ann Florini, 2014. "The Public Roles of the Private Sector in Asia: The Emerging Research Agenda," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 1(1), pages 33-44, January.
    2. repec:gam:jsusta:v:9:y:2017:i:9:p:1532-:d:110096 is not listed on IDEAS
    3. Davide Fiaschi & Elisa Giuliani & Federica Nieri, 2014. "Bric Companies Seeking Legitimacy Through Corporate Social Responsibility," Discussion Papers 2014/183, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    4. Wenlang Zhang & Gaofeng Han & Brian Ng & Steven Chan, 2015. "Corporate Leverage in China: Why has It Increased Fast in Recent Years and Where do the Risks Lie?," Working Papers 102015, Hong Kong Institute for Monetary Research.

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