Does CSR Influence firm performance indicators? evidence from Chinese pharmaceutical enterprises

Abstract

This research is carried out in the backdrop of increasing product quality and environmental degradation scandals associated with Chinese Pharmaceuticals in recent years. We examine the data of 125 Chinese Pharmaceuticals between 2010-2016 to investigate the impact of overall CSR (Corporate Social Responsibility) performance as well as five unique aspects of CSR performance such as shareholders, employees, customers and suppliers, environmental practices, and the society to gauge the impact of these individual dimensions on firm’s financial performance. A mixed method approach is adopted where twenty experts from the Pharmaceutical industry firstly rate the importance of different stakeholder dimensions based on a five-point Lickert scale. Subsequently, the CSR scoring system is developed by incorporating the weighted average of experts’ scores and the performance of CSR indicators obtained from the Hexun CSR rating. The firm performance is measured by Tobin’s Q, ROA, ROE, and EPS ratios. The outcome of panel based regression models reveal that CSR has a positive and significant influence on firm’s financial performance. Moreover, although all the CSR dimensions relate positively to firm performance nonetheless environmental aspect of CSR has the most profound impact on firm performance followed by customer & suppliers, and employees. However, shareholders and society dimensions have relatively lesser influence on firm performance. These results imply that Chinese Pharmaceuticals shall further optimize their CSR performance as it can not only create a favorable brand image for various stakeholders but also results in superior financial performance.