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

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  • Farag, Hisham
  • Meng, Qingwei
  • Mallin, Chris

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.

Suggested Citation

  • Farag, Hisham & Meng, Qingwei & Mallin, Chris, 2015. "The social, environmental and ethical performance of Chinese companies: Evidence from the Shanghai Stock Exchange," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 53-63.
    • Handle: RePEc:eee:finana:v:42:y:2015:i:c:p:53-63
    DOI: 10.1016/j.irfa.2014.12.002
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    More about this item

    Keywords

    Corporate social responsibility; Ethics; Social performance and financial performance; Chinese companies;
    All these keywords.

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values

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