Corporate social performance aspiration and its effects

In recent years, amid various social and environmental problems, companies have been urged to engage more extensively in corporate social responsibility activities, particularly in stakeholder-oriented countries. Previous studies have made inconsistent findings about how firms respond to feedback about their social performance. Drawing on insights from the behavioral theory of the firm, we propose that in stakeholder-oriented countries such as Japan, firm executives are likely to set corporate social performance aspirations by comparing their own corporate social performance with that of their industry peers, and these aspirations in turn drive different corporate social responsibility behaviors. Employing a sample of Japanese listed firms, we find a U-shaped relationship between negative attainment discrepancy in corporate philanthropic performance aspiration and corporate philanthropic expenditure, but no relationship between negative attainment discrepancy in corporate environmental performance aspiration and corporate environmental expenditure. We also find a linear relationship between positive attainment discrepancy in corporate philanthropic/environmental performance aspiration and corporate philanthropic/environmental expenditure. Our empirical results further show that the above effects would change depending on whether or not the firm attains its financial performance aspirations. Our study contributes to the literatures of corporate social responsibility and organizational aspiration.