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Do Political Ties Cause Over-Investment in Corporate Social Responsibility? Empirical Evidence from Chinese Private Firms

Author

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  • Chan Xiong

    (Department of Marketing, School of Management, Wuhan Institute of Technology, Wuhan 430205, China)

  • Ke Zhang

    (Department of Financial Management, School of Accounting, Shanghai Lixin University of Accounting and Finance, Shanghai 201209, China)

  • Xiaoping Zhao

    (Department of Management and Organization, Shanghai Jiao Tong University, Shanghai 200030, China)

Abstract

One of the most significant trends of firms in recent years is the investment growth in Corporate Social Responsibility (CSR) in China. CSR investment helps firms to create business value and develop strategic resources, whereas many firms ignore its optimal level. Extraordinary enthusiasm for CSR possibly leads to over-investment in CSR, which increases firms’ cost and has a negative influence on financial performance. We tried to explore the reasons why Chinese firms are so enthusiastic about CSR investment. Drawing upon the social exchange theories, we tested the relationship between political ties and over-investment in CSR, and examined how this relationship is moderated by the degree of resource competition. Based on a sample of 2304 private firms in China, we found that political ties have a positive effect on CSR over-investment. Our findings also suggested that the degree of resource competition positively moderates the relationship between political ties and over-investment in CSR.

Suggested Citation

  • Chan Xiong & Ke Zhang & Xiaoping Zhao, 2020. "Do Political Ties Cause Over-Investment in Corporate Social Responsibility? Empirical Evidence from Chinese Private Firms," Sustainability, MDPI, vol. 12(17), pages 1-14, September.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:17:p:7203-:d:408281
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    References listed on IDEAS

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    2. Lei Xu & Xiaoning Guo & Yan Liu & Xiaochen Sun & Jie Ji, 2022. "How Does Corporate Charitable Giving Affect Enterprise Innovation? A Literature Review and Research Directions," Sustainability, MDPI, vol. 14(23), pages 1-21, November.

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