Does CSR Signal the Firm Value? Evidence from China

Compared to the rapid development of Corporate Social Responsibility (CSR) practices in developing countries, especially in China, the research about the effect of CSR on firm value has evolved more slowly. This paper examines the relationship between CSR and firm value used by listed Chinese companies from 2010 to 2017. The results for the whole sample show CSR significantly reduces firm value. Additionally, there are no significant differences for the effect of CSR on firm value between state owned enterprises (SOEs) and non-SOEs or sensitive industry and non-sensitive industry. To explore whether the relationship changes over time, we divided the period into two sub-periods. During 2010-2014, the results are similar with those obtained by the whole sample. However, the results significantly change during 2015-2017. Specifically, the negative and significant relationship between CSR and firm value becomes non-significant in the second sub-period. Compared to the weakening effect of CSR for non-SOEs on firm value, CSR for SOEs alleviates the effect, and CSR of SOEs increases firm value significantly. Similar results are obtained for non-sensitive industry and sensitive industry. The changes are the result of increasing awareness by government, companies, and investors on sustainable development after 2015. This finding enriches the research on the dynamic effect of CSR on firm value in developing countries.