Value Creation or Opportunism? Corporate Political Connection and Social Responsibility

Abstract

The reasons underlying the inconsistency in corporate social responsibility (CSR) behaviors have been a topic of ongoing controversy, especially in emerging markets characterized by substantial government intervention, where the issue is further complicated. An empirical examination of private listed companies in China from 2010 to 2019 investigates the factors contributing to the inconsistency in CSR behaviors under political intervention, assessing the impact of political connections on different types of CSR and the moderating role of institutional environments. Additionally, it analyzes the economic consequences of various CSR types under political connections. The findings indicate that: (1) political connections facilitate external CSR while inhibiting internal CSR practices; (2) economic and legal environments play a moderating role in the relationship between political connections and CSR behaviors. Specifically, the financial environment can mitigate both the negative impact of political connections on internal CSR and the positive impact on external CSR. However, the legal environment only reduces the negative effect on internal CSR without influencing the suppression of external CSR; (3) for firms with political connections, external CSR has a negative impact on corporate value, whereas internal CSR contributes to the long-term growth of corporate value. These insights enrich the understanding of CSR behaviors in emerging markets and offer practical guidance for managers and policymakers in crafting CSR strategies that align with institutional contexts.