A new approach for addressing endogeneity issues in the relationship between corporate social responsibility and corporate financial performance

By Wei Liu, Xuefeng Shao, M. D. Sisto, W. Li. 2020

113 citations recorded by the source corpus.

Abstract This paper aims to reexamine the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP) using a panel dataset of Chinese listed firms. Previous studies obtained divergent empirical evidence on the CSR-CFP relationship due to unclear, incomplete, or inappropriate consideration of endogeneity issues. By introducing a Heckman-2SLS model, we comprehensively address the main endogeneity problems (i.e., sample selection bias, reverse causality, and unobserved heterogeneity) simultaneously within the CSR-CFP relationship. Results not only indicate a robust CSR-CFP relationship after correcting for endogeneity issues but also serve as a strong case for future investigation and correction of endogeneity issues.

Subfields: Economics and Econometrics, Marketing, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/8b528a27f840b07a36265bfcacfd49c76656a27e