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Relationship between Corporate Social Responsibility and Financial Performance in the Mineral Industry: Evidence from Chinese Mineral Firms

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  • Xiping Pan

    () (School of Humanities & Economic Management, China University of Geosciences, Beijing 100083, China
    Key Laboratory of Carrying Capacity Assessment for Resource and Environment, Ministry of Land and Resource, Beijing 100083, China)

  • Jinghua Sha

    () (School of Humanities & Economic Management, China University of Geosciences, Beijing 100083, China
    Key Laboratory of Carrying Capacity Assessment for Resource and Environment, Ministry of Land and Resource, Beijing 100083, China)

  • Hongliang Zhang

    () (School of Humanities & Economic Management, China University of Geosciences, Beijing 100083, China
    School of Economics and Management, Southwest University of Science and Technology, Mianyang 621010, China)

  • Wenlan Ke

    () (School of Humanities & Economic Management, China University of Geosciences, Beijing 100083, China
    Key Laboratory of Carrying Capacity Assessment for Resource and Environment, Ministry of Land and Resource, Beijing 100083, China)

Abstract

This paper examines the relationship between Corporate Social Responsibility (CSR) and Corporate Financial Performance (CFP) using panel data for 228 Chinese mineral listed firms from 2010 to 2013 with Pooled Least Squares regression analysis. Our study considers five different sublevel CSR issues—shareholder responsibility, employee responsibility, environmental responsibility, public responsibility, and supplier, customer and consumer responsibility—in capturing the effects of CSR elements on CFP. The estimation results show the different effects of each sublevel CSR issue on CFP. Overall, shareholder, employee responsibility, environmental responsibility, supplier, customer and consumer responsibility have significant relationships with CFP, which are the stakeholders who have the closest linkage with firm operations. Meanwhile, public responsibility outside the firm does not show significant interaction with CFP, which is why many mineral firms ignore the public interest and this leads to conflicts. Shareholder responsibility has the most significant positive effect on CFP. Supplier, customer and consumer responsibility and environmental responsibility usually have negative effects on CFP as costs increase. Moreover, all 228 listed mineral firms that were selected in this paper have been classified into five sub-sectors: the extractive industry, metal fabrication industry, oil and gas industry, gas and water-related industry, and oil-producing equipment industry, based on the Industry Classification Benchmark (ICB). Our study shows that the differences in the relationship between CSR and CFP for five sublevel industries are due to industry characteristics. If the government wants to solve these conflicts and positively encourage firms to adopt CSR, it is necessary to create a mining development environment whereby firm profits are closely tied to CSR.

Suggested Citation

  • Xiping Pan & Jinghua Sha & Hongliang Zhang & Wenlan Ke, 2014. "Relationship between Corporate Social Responsibility and Financial Performance in the Mineral Industry: Evidence from Chinese Mineral Firms," Sustainability, MDPI, Open Access Journal, vol. 6(7), pages 1-25, June.
  • Handle: RePEc:gam:jsusta:v:6:y:2014:i:7:p:4077-4101:d:37620
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    References listed on IDEAS

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    1. Wu, Meng-Wen & Shen, Chung-Hua, 2013. "Corporate social responsibility in the banking industry: Motives and financial performance," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3529-3547.
    2. Hans-Ulrich Derlien & B. Guy Peters, 2008. "Introduction," Chapters,in: The State at Work, Volume 2, chapter 1 Edward Elgar Publishing.
    3. Jensen, Michael C., 2002. "Value Maximization, Stakeholder Theory, and the Corporate Objective Function," Business Ethics Quarterly, Cambridge University Press, vol. 12(02), pages 235-256, April.
    4. Scholtens, Bert, 2008. "A note on the interaction between corporate social responsibility and financial performance," Ecological Economics, Elsevier, vol. 68(1-2), pages 46-55, December.
    5. Iwata, Hiroki & Okada, Keisuke, 2011. "How does environmental performance affect financial performance? Evidence from Japanese manufacturing firms," Ecological Economics, Elsevier, vol. 70(9), pages 1691-1700, July.
    6. Parket, I. Robert & Eilbirt, Henry, 1975. "The practice of business social responsibility: the underlying factors," Business Horizons, Elsevier, vol. 18(4), pages 5-10, August.
    7. Ackah-Baidoo, Abigail, 2012. "Enclave development and ‘offshore corporate social responsibility’: Implications for oil-rich sub-Saharan Africa," Resources Policy, Elsevier, vol. 37(2), pages 152-159.
    8. Hilson, Gavin, 2012. "Corporate Social Responsibility in the extractive industries: Experiences from developing countries," Resources Policy, Elsevier, vol. 37(2), pages 131-137.
    9. Amalendu Bhunia, 2012. "Association between corporate social responsibility and firm financial performance: empirical evidence from bombay stock exchange," Economics Bulletin, AccessEcon, vol. 32(2), pages 1-20.
    10. Lioui, Abraham & Sharma, Zenu, 2012. "Environmental corporate social responsibility and financial performance: Disentangling direct and indirect effects," Ecological Economics, Elsevier, vol. 78(C), pages 100-111.
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    Citations

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    Cited by:

    1. Eduardo Ortas & Igor Álvarez & Ainhoa Garayar, 2015. "The Environmental, Social, Governance, and Financial Performance Effects on Companies that Adopt the United Nations Global Compact," Sustainability, MDPI, Open Access Journal, vol. 7(2), pages 1-25, February.
    2. repec:gam:jsusta:v:10:y:2018:i:3:p:772-:d:135793 is not listed on IDEAS
    3. repec:eee:jrpoli:v:54:y:2017:i:c:p:25-42 is not listed on IDEAS
    4. repec:gam:jsusta:v:9:y:2017:i:7:p:1212-:d:104246 is not listed on IDEAS
    5. Elena Dobre & Georgiana Oana Stanila & Laura Brad, 2015. "The Influence of Environmental and Social Performance on Financial Performance: Evidence from Romania’s Listed Entities," Sustainability, MDPI, Open Access Journal, vol. 7(3), pages 1-41, March.
    6. repec:gam:jsusta:v:9:y:2017:i:8:p:1300-:d:105931 is not listed on IDEAS

    More about this item

    Keywords

    corporate social responsibility; corporate financial performance; Chinese mineral firms; relationship;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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