The Impact of Selected Moderators on the Relationship between CSR and Profitability

Abstract

The causal relationship between corporate financial performance (profitability) and corporate social responsibility (CSR) has been a hot topic. Given that there is no conclusive answer, some scholars suggest exploring this relationship in a different context. Existing literature has focused on studying the impact of CSR on profitability in the context of various mediators or moderators, with little attention paid to the reverse effect, namely, the effect of profitability on CSR under various moderators. The objective of the doctoral thesis is to study and verify whether the profitability of different types of companies, companies at different life cycle stages, and companies with different levels of internal control have a comparable impact on CSR engagement. Take Chinese home appliance listed companies from 2018 to 2020 as the research sample. A specific multi-attribute AHP (analytic hierarchy process) model is applied to determine the CSR engagement for Chinese home appliance listed companies’ conditions. The interactive regression model is used to analyse the impact of the selected moderators on the relationship between profitability and CSR engagement. First of all, the specific multi-attribute analytic hierarchy process model is proposed and validated as a suitable tool for evaluating the CSR engagement of Chinese home appliance listed companies. Secondly, the overall relationship between profitability and CSR engagement is tested through the multiple regression model without moderators, and the results suggest that profitability is not related to CSR engagement of Chinese home appliance listed companies. Thirdly, the influence of the moderators on this relationship is verified. The first interactive regression model is designed to explore the moderating effect of company type on the relationship between profitability and CSR engagement. The results show that, like non-family companies, the profitability of family companies has no significant impact on CSR engagement. In addition, we unexpectedly find that family companies are less involved in CSR than non-family companies in the investigated Chinese sector. Then, the second interactive regression model is used to investigate the moderating effect of the corporate life cycle stage on the relationship between profitability and CSR engagement. The results indicate that for mature companies, profitability has a significant positive impact on CSR engagement, while for non-mature companies, profitability has a significant negative impact on CSR engagement. Moreover, we notice that the average CSR engagement of Chinese home appliance listed companies decreases from the introduction stage to the mature stage and increases slightly from the mature stage to the decline stage. Next, the third interactive regression model is employed to explore the moderating effect of internal control on the relationship between profitability and CSR engagement. The results imply that a higher level of internal control prompts the effect of profitability on CSR engagement, and directly helps Chinese home appliance listed companies to engage in more CSR. Therefore, the doctoral thesis results provide more convincing evidence that when studying the impact of profitability on CSR engagement, it is essential to distinguish between different contexts, such as company types, corporate life cycle stage, and level of internal control. In comparison, the generalised findings are simplified and not valid