Corporate governance and corporate social responsibility: new evidence from China

• DOI: https://doi.org/10.1108/IJAIM-09-2021-0195
• Published date: 25 February 2022
• Date: 25 February 2022
• Pages: 211-229
• Subject Matter: Accounting & finance,Accounting/accountancy,Accounting methods/systems
• Author: Ahmed Aboud,Xinming Yang

Corporate governance and

corporate social responsibility:

new evidence from China

Ahmed Aboud

University of Portsmouth, Portsmouth, UK and

Faculty of Commerce, Beni-Suef University, Beni Suef, Egypt, and

Xinming Yang

University of Southampton, Southampton, UK

Abstract

Purpose –This paper aims to examine the impact of corporate governance on corporate social

responsibility (CSR) performance, paying particular attention to modernChinese businesses. Particularly, it

examines how ownership concentration, boards of directors and boards of supervisorsaffect the quality of

CSR performance.

Design/methodology/approach –This study employs the regression analysis using a sample from

listed companiesin Shanghai and Stock Exchanges covering2014 until 2018.

Findings –Using a sample of listed companies in Shanghai and Stock Exchanges, the empiricalevidence, A-

share listed companies between 2014 and 2018, this empirical investigationdemonstrates that corporate governance

does indeed have a signif‌icant effect on CSR. However, various types of corporate governance mec hanisms have

differing effects on CSR. The authors f‌ind that ownership concentration has a positive impact on CSR performance,

while the size of a company’s board of supervisors has a positive impact on CSR performance. By doing so, the

authors provide practical implications to users, and regulatory authorities to make better decisions

Originality/value –This paper contributesto the existing literature by examining the impact of corporate

governanceon a company’s abilitiesto meet its CSR objectives in China. Much of the empirical studies on this

issue are centredon the Western world, notably Western Europe and the USA.

Keywords Corporate social responsibility performance, Corporate governance, Stakeholder theory,

Principal-agent theory

Paper type Research paper

1. Introduction

Since the development of corporate social responsibility (CSR) as a schoolof thought, there

has been much academic and practical debate about whether it is advantageous for

businesses to practice CSR. Traditional theories around corporate governance are focused

on advocating for prof‌it maximisation, traditionally seen as the main goal of any business.

Consequently, most companieshave devoted their resources to achieving this and have not

signif‌icantly invested in CSR (Gupta et al.,2016). Furthermore, a company’s ability to fulf‌il

any commitments it has made to social responsibility depends on its own competitiveness

and ability to survive (Arora and Dharwadkar, 2011).Despite this, in recent years, pressure

has built on companies to focus on CSR, and the law has developed and crystallisedaround

the social responsibilitiesowed by businesses (Filatotchev and Nakajima, 2014).

Authors would like to thank the editor and the two anonymous reviewers for their guidelines and

insightful suggestions.

Corporate

governance

211

Received25 September 2021

Revised15 December 2021

Accepted25 January 2022

InternationalJournal of

Accounting& Information

Management

Vol.30 No. 2, 2022

pp. 211-229

© Emerald Publishing Limited

1834-7649

DOI 10.1108/IJAIM-09-2021-0195

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1834-7649.htm

In 1916, the US scholar Clark f‌irst proposedthe theory of corporate social responsibility. More

than a century later, the theory has become widely adopted by Western companies, and since the

1980s, there has been a growing “corporate citizenship”movement in Europe and the USA. The

movement aims to promote and shine a light on companies’CSR commitments, and its

burgeoning popularity has coincided with better publication of individual companies’CSR

information (Beasley, 1996). In the 1990s, as people became more focused on issues around

climate change and the environment, more businesses began looking at their own sustainability,

which triggered a new wave of publication around CSR (Doh and Guay, 2006).

In China, however, publication of CSR information has been less clear and dogged by confusing

content, unclear concepts and variations in the standard of publication (Huafang and Jianguo,

2007). Unlike in the West, the concept of corporate social responsibility is newer and consequently

has not had suff‌icient time to development and mature (Huafang and Jianguo, 2007). Although

many companies have started publishing CSR information, including reports into their activities,

there are still headline-making stories about poor CSR. Recent examples include the deaths of 55

people after a leaking oil pipeline owned by Qingdao Sinopec exploded, the discovery of worms in

products being produced at a Ferrero Rocher factory and the use of harmful plastics by several

liquor companies (Chen and Jaggi, 2000). The discovery of these problems poses a threat to China’s

economy by undermining its businesses’global competitiveness.

There has been much academic debate about China’s CSR laws, with some scholars

stating that both the country’s laws and regulations are f‌lawed and that it lacks adequate

supervision and disclosure mechanisms. In 2010, in a bid to combat this problem, China’s

State-owned Assets Supervision and Administration Commission (SASAC) published a list

of several core social responsibilities that all centrally listed companies must follow. This

was really the f‌irst time that CSR was institutionalised and made concrete in China, and

SASAC’s work served to help standardise how businesses were meeting their CSR

objectives. SASAC also helped lay out responsibilities owed by individual stakeholders

through standardisingcorporate governance guidelines.

Research into CSR, both inside China and beyond, demonstrates that good CSR performance

has a strong correlation with successful corporate governance. The twin f‌ields of corporate

governance and CSR have been developed in recent years and have been established in

stakeholder theories and practice (Jain and Jamali, 2016). Corporate governance holds that it is the

responsibility of whoever controls a company to determine its social obligations and how best to

fulf‌il them. Work in this area also holds that a critical step towards improving CSR awareness is to

monitor and regulate managerial behaviour. Strong corporate governance can serve to stop

unscrupulous managers from following their own interests in a way that might prove detrimental

to the company (Donnelly and Mulcahy, 2008). Consequently, if a compan ys pends time investing

in and improving its corporate governance, it will be to the benef‌itofallpartieswithinthe

company as well as assisting with the development of CSR performance (Filatotchev and

Nakajima, 2014). Moreover, if a country has strong corporate governance structures, laws, and

regulations, it serves to encourage companies to meet their social responsibilities –not least

because there is external scrutiny of their actions. This external pressure on businesses can ensure

that companies take responsibility for CSR and in turn lead to greater social welfare as a whole

(Finkelstein and Mooney, 2003). There is also a clear benef‌it to businesses as greater corporate

governance can help them maximise value that should be appreciated by key stakeholders within

an organisation.

Although several studies on both corporate governance and CSR, there are not many

empirical studies looking at how corporate governance impacts CSR performance in the

developing markets (Garcia-Toreaet al.,2016). Some researchers have surveyed consumers,

stakeholders and those involved with corporate governance for their perspectives and used

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