Employee Satisfaction, Corporate Social Responsibility and Financial Performance
Abstract
:1. Introduction
2. Backgrounds of CSR and Literature Review
2.1. Implications and Measurement of CSR
2.2. Relationship between CSR and Financial Performance
2.3. CSR and Employee Turnover
2.4. Employee Turnover and Financial Performance
3. Research Hypothesis
4. Sample Data and Research Design
4.1. Sample Descriptions and Control Group Selection
4.1.1. Sample Descriptions
4.1.2. Control Group Design
- (1)
- Financial holding companies are excluded from the award winners because their nature is different from other companies and their assets are too large compared with the other companies to the extent that the design selection criteria would be overestimated.
- (2)
- After the natural logarithm of the assets of the remaining winners is taken, the mean and standard deviation are calculated.
- (3)
- Furthermore, the mean value minus one standard deviation is used as the selection criterion, and non-awarded companies whose natural logarithm of the assets are above the selection criterion are selected for the control group.
4.1.3. Treatment of Extreme Values
4.2. Research Variables
4.2.1. CSR Performance
4.2.2. Financial Performance and Control Variables
4.2.3. Employee Satisfaction
4.3. Model Framework and Empirical Models
5. Research Results
6. Discussion
7. Conclusions, Implications, Limitations and Recommendations
8. Note Materials
- In the last three years, the Ministry of Corporate Affairs in India implemented the Companies Act, 2013, which requires organizations to spend 2% of their average net profit on CSR activities.
- The macroscopic infers that “good employee reactions” will bring better “overall performance” of the company after a company improves its relations with its employees.
- Other scholars use the corporate citizenship indicators in the benchmark corporate reputation survey published by the CommonWealth Magazine as the basis for CSR measurement.
- Take the 2010 CommonWealth Corporate Citizenship Awards as an example: The 2010 Corporate Citizenship Survey is conducted by CommonWealth Magazine in reference to the United Nations’ guidelines, the OECD, and the Dow Jones Sustainability Index. The survey is divided into three stages. The first stage is the preliminary selection of companies that have generated profits for three consecutive years from the public companies (including listed, over-the-counter, and emerging companies) supervised by the Financial Supervisory Commission as well as foreign companies in Taiwan selected from the CommonWealth Top 1000 Survey and recommended by scholars and experts. In 2010, there were a total of 2072 publicly listed companies and 151 foreign companies. During the second-stage selection, the editorial department of CommonWealth Magazine rates the responses from the companies. Finally, a 12-member panel of judges conducts the third stage of final selection with credibility and social prestige to select the CommonWealth Top 50 Corporate Citizens out of 118 companies (including 54 large companies, 27 medium-sized companies, and 36 foreign companies, with a capital size of TWD 10 billion as the classified threshold of Taiwanese companies.
- This also explains why the Taiwan Employment 99 Index of the Taiwan Stock Exchange can define whether a company is fulfilling its social responsibility based solely on the number of employees it employs, because unemployment in a full employment environment has a comprehensive impact on society. Therefore, the companies that hire a large number of employees contribute to a certain extent to social stability.
- Take the Fubon Taiwan CSR Fund for example. This type of fund requires a certain percentage of shareholding in socially responsible enterprises. For example, such a fund requires that the weighting on its investment in “socially responsible stocks” should not be lower than 60% of the fund’s net asset value.
- We thank the anonymous academic editor for his suggestion to add a table that summarizes the main literature contribution.
Reference | Related Fields | Main Findings and Implications |
Wood and Jones [10] | Stakeholder Theory | Stakeholder theory is the key to understanding the structure and aspects of the relationship between businesses and society because it helps explain the relationship among various business performance indicators. The stakeholder theory recognizes that stakeholders, namely, shareholders, employees, customers, competitors, communities, upstream and downstream suppliers, and governments, are the recipients of a company’s actions and outcomes and the source of judgments regarding how well the company is meeting expectations. |
McWilliams and Siegel [11] | CSR Definitions | McWilliams and Siegel [11] defined CSR as actions that appear to further some social good beyond the firm’s interests and that which is required by law. |
Carrol [12] | CSR Definitions | Carrol [12] described corporate social performance as the three-dimensional integration of CSR, corporate social responsiveness, and social issues. |
Matten and Moon [13] | CSR Definitions | Matten and Moon [13] defined corporate social performance a synonym of CSR, corporate social responsiveness, or any other interaction between business and social environment. |
Frederick [14] | CSR Definitions | Frederick [14] explored CSR as a requirement for businesses to monitor the operation of an economic system to meet public expectations. |
Kim et al. [1] | CSR and Financial Performance | Kim et al. [1] showed that the assurance of CSR reports will reduce firms’ financial costs by lowering the discount rate for investors, which will in turn improve the financial outcomes of the firms. |
Griffin and Mahon [3] | CSR and Financial Performance | Griffin and Mahon [3] summarized 51 previous studies and conclude that the five most commonly measured variables in past studies are: size, return on assets, return on equity, asset age (fixed net assets/gross fixed assets), and five-year return on sales. |
McWilliams and Siegel [11] | CSR and Financial Performance | McWilliams and Siegel [11] assumed that there are two firms that produce identical goods, except one company adds a social characteristic to its product. They show that, in equilibrium, both will be equally profitable. |
Cho et al. [21] | CSR and Financial Performance | Cho et al. [21] collected 191 sample firms listed on the Korea Exchange (KEJI) and found that CSR has a partial positive correlation with a firm’s financial performance proxied by return on assets and its firm value measured using Tobin’s Q. |
Uadiale and Fagbemi [22] | CSR and Financial Performance | Uadiale and Fagbemi [22] formed a sample of 40 audited financial statements of listed companies in Nigeria and found that CSR has a positive and significant influence on ROE and ROA. |
Margolis and Walsh [24] | CSR and Financial Performance | Margolis and Walsh [24] reviewed 18 papers in the previous CSR literature and showed that only 53% of these papers document a positive correlation between CSR and financial performance. |
Cherian et al. [25] | CSR and Financial Performance | Cherian et al. [25] used secondary data from 50 Indian manufacturing firms from 2011 to 2017 and found a negative impact on companies from the disclosure requirement to comply with laws and regulations. |
Lin et al. [16] | CSR, Financial Performance, and Mediation Effects | Lin et al. [16] showed that intellectual capital has a mediation effect on the relationship between CSR and financial performance, while the industry category moderates the direct impact of CSR on financial performance. |
Carmeli, Gilat, and Waldman [46] | CSR, Employees and Organization | Carmeli, Gilat, and Waldman [46] surveyed employees and supervisors at four electronics and media industry companies and showed that CSR leads to organizational recognition. |
Jones [41] | CSR, Employees and Organization | Jones [41] found that employees’ attitudes regarding a volunteerism program are positively correlated with organizational pride and identification. |
Koys [48] | Employees and Financial Performance | Koys [48] showed that employee satisfaction, organizational citizenship behavior, and employee turnover in the previous period correlate to the corporate profitability in the next period. |
Edmans [51] | Employees and Financial Performance | Edmans [51] adopted the annual survey data of the “100 Best Companies to Work For in America” as an indicator of employee satisfaction, and showed that these “Best Companies” have annual stock price returns that beat the market by two to three percent from 1984 to 2009. |
Ton and Huckman [56] | Employees and Financial Performance | Ton and Huckman [56] analyzed employee turnover of major retail chains in the U.S. and found that for this industry employee turnover is linked to the decline of corporate performance. |
Grennan [57] | Employees and Financial Performance | Grennan [57] found that corporate culture, constructed by the employee reviews of the firm, is positively correlated with long-term firm value. |
Huang et al. [60] | Employees and Financial Performance | Huang et al. [60] explored the impact of employee satisfaction on firm value and found that the organizational form affects the employees’ perceptions of the company and leadership and then further affects corporate performance. |
Yoo, Choi, and Chon [62] | Employees and Financial Performance | Yoo, Choi, and Chon [62] suggested that CSR affects accounting profitability by enhancing employee commitment. |
- 8.
- We thank the anonymous academic editor for his suggestion to add a table to show the hypotheses that are confirmed.
Hypotheses | Predictions | Test Results |
H1a | The firms that focus more on CSR have significantly lower employee turnovers than the control firms in the same industry. | Supported (Table 3) |
H1b | The firms that focus more on CSR have significantly more stable employee turnovers than the control firms in the same industry. | Supported (Table 3) |
H2a | The firms with lower employee turnovers financially outperform the control firms in the same industry. | Supported (Table 4) |
H2b | The firms with stable employee turnovers in the previous period financially outperform the control firms in the same industry. | Supported (Table 4) |
H3 | When employee turnover serves as the mediation variable, with a control of industry characteristics, the impact of CSR on financial performance becomes significant. | Supported (Table 5 and Table 6) |
Author Contributions
Funding
Conflicts of Interest
References
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Panel A Industry Distribution | |||||||
---|---|---|---|---|---|---|---|
Industry | No. of Firms | % of Total | |||||
Manufacturing | 3505 | 67.5% | |||||
Electricity and Gas Supply | 22 | 0.4% | |||||
Water Supply and Remediation Activities | 20 | 0.4% | |||||
Construction | 109 | 2.1% | |||||
Wholesale and Retail Trade | 265 | 5.1% | |||||
Transportation and Storage | 183 | 3.5% | |||||
Accommodation and Food Service Activities | 37 | 0.7% | |||||
Information and Communication | 107 | 2.1% | |||||
Financial and Insurance Activities | 587 | 11.3% | |||||
Real Estate Activities | 330 | 6.4% | |||||
Professional, Scientific and Technical Activities | 11 | 0.2% | |||||
Arts, Entertainment and Recreation | 7 | 0.1% | |||||
Other Service Activities | 13 | 0.3% | |||||
Total | 5196 | 100.0% | |||||
Panel B Descriptive Statistics | |||||||
Variable | Mean | Std. Dev. | Min. | Max. | 5% percentile | 95% percentile | |
ROA (%) | 8.63 | 7.51 | −43.35 | 39.73 | −0.13 | 22.15 | |
ROE (%) | 7.59 | 13.74 | −132.73 | 61.06 | −12.74 | 26.10 | |
Turnover (%) | 10.25 | 11.91 | 0 | 86 | 0 | 33 | |
StdTurnover | 6.15 | 6.36 | 0 | 47.12 | 0 | 19.31 | |
CSRt-1 | 0.10 | 0.30 | 0 | 1 | 0 | 1 | |
Size (TWD) | 17.37 | 1.36 | 13.78 | 21.55 | 13.05 | 20.21 | |
Age (year) | 32.32 | 16.27 | 2 | 102 | 8 | 61 | |
Panel C Pearson and Spearman Correlation Matrix | |||||||
ROE | ROA | turnover | StdTurnover | CSRt-1 | Size | Age | |
ROE | 1 | 0.6416 *** | −0.0939 *** | −0.0584 *** | 0.1022 *** | 0.0098 | −0.0125 |
ROA | 0.6416 *** | 1 | −0.0271 * | −0.0834 *** | 0.1312 *** | −0.1489 *** | −0.1482 *** |
turnover | −0.0939 *** | −0.0271 * | 1 | 0.3368 *** | −0.0502 ** | −0.1019 *** | −0.1197 *** |
StdTurnover | −0.0584 *** | −0.0834 *** | 0.3368 *** | 1 | −0.0414 *** | −0.0661 *** | −0.0635 *** |
CSRt-1 | 0.1022 *** | 0.1312 *** | −0.502 ** | −0.0414 ** | 1 | 0.1843 *** | −0.0357 ** |
Size | 0.0098 | −0.1489 *** | −0.1019 *** | −0.0661 *** | 0.1843 *** | 1 | 0.0067 *** |
Age | −0.0125 | −0.1482 *** | −0.1197 *** | 0.0635 *** | −0.0357 ** | 0.0067 | 1 |
Turnover | StdTurnover | ROA | ROE | |||||
---|---|---|---|---|---|---|---|---|
Good | Comp | Good | Comp | Good | Comp | Good | Comp | |
N | 522 | 4674 | 522 | 4674 | 522 | 4674 | 522 | 4674 |
Mean | 0.0846 | 0.1045 | 0.0536 | 0.0624 | 11.5833 | 8.3047 | 11.7955 | 7.1249 |
Std | 0.0960 | 0.1189 | 0.0531 | 0.0647 | 8.3102 | 7.3445 | 11.0309 | 13.9302 |
t-stat | 4.36 *** | 3.49 ** | −8.64 *** | −8.91 *** |
Model | (1) | (2) |
---|---|---|
Variable | Turnover | StdTurnover |
Intercept | 0.2881 (12.31) *** | 0.1021 (8.08) *** |
CSRt-1 | −0.0147 (−2.366) ** | −0.0069 (−2.33) * |
Age | −0.0009 (−8.88) *** | −0.0003 (−4.76) *** |
Size | −0.0064 (−4.57) *** | −0.0019 (−2.53) ** |
F-stat Adj-R2 | 28.27 *** 0.0305 | 10.2 *** 0.0105 |
N | 5196 | 5196 |
Model Variable | (3) | (4) | ||
---|---|---|---|---|
ROAt | ROEt | ROAt | ROEt | |
Intercept | 1.4422 (1.52) | −0.7129 (−0.31) | 1.0820 (1.14) | −2.3168 (−1.01) |
Turnover | −2.1794 (−3.97) *** | −6.5096 (−4.80) *** | - - | - - |
StdTurnover | - - | - - | −2.4388 (−2.38) ** | −3.2907 (−1.31) |
Fint-1 | 0.7554 (84.91) *** | 0.5354 (46.25) *** | 0.7541 (84.07) *** | 0.5375 *** (46.25) *** |
Age | −0.0086 (−2.10) * | 0.0024 (0.24) | −0.0074 (−1.82) * | 0.0074 (0.75) |
Size | −0.0274 (−0.5) | 0.0101 (0.07) | −0.0178 (−0.33) | 0.0482 (0.36) |
F-stat | 1209.33 *** | 330.79 *** | 1205.54 *** | 326.39 *** |
Adj-R2 | 0.6195 | 0.3077 | 0.6188 | 0.3048 |
N | 5196 | 5196 | 5196 | 5196 |
Model Variable | (5) | (6) | (7) | |||
---|---|---|---|---|---|---|
ROAt | ROEt | ROAt | ROEt | ROAt | ROEt | |
Intercept | 1.4015 (1.48) | −1.4524 (−0.63) | 2.0398 (2.12) * | 0.4230 (0.18) | 1.7084 (1.78) * | −1.1219 (−0.49) |
CSRt-1 | 0.8704 (3.94) *** | 2.0204 (3.74) ** | 0.8443 (3.83) *** | 1.9429 (3.60) ** | 0.8646 (3.92) *** | 2.0052 (3.71) ** |
Turnover | - - | - - | −2.1152 (−3.86) *** | −6.3606 (−4.70) *** | - - | - - |
StdTurnover | - - | - - | - - | - - | −2.3937 (−2.34) * | −3.0756 (−1.22) |
Fint-1 | 0.7508 (83.25) *** | 0.5341 (45.91) *** | 0.7496 (83.18) *** | 0.5310 (45.66) *** | 0.7482 (82.37) *** | 0.5329 (45.65) *** |
Age | −0.0065 (−1.60) | 0.0095 (0.97) | 0.0085 (−2.07) * | 0.0037 (0.37) | −0.0073 (−1.80) * | 0.0087 (0.88) |
Size | −0.0490 (−0.88) | −0.0271 (−0.20) | −0.0630 (−1.13) ** | −0.0681 (−0.50) | −0.0547 (−0.98) | −0.0331 (−0.24) *** |
F-stat | 1209.24 *** | 328.91 *** | 1062.78 *** | 291.72 *** | 1059.68 *** | 288.01 *** |
Adj-R2 | 0.6195 | 0.3064 | 0.6205 | 0.3092 | 0.6198 | 0.3525 |
N | 5196 | 5196 | 5196 | 5196 | 5196 | 5196 |
Panel A Dependent Variable (Mediator: Turnover) | |||
---|---|---|---|
t-Statistic | p-Value | ||
ROA | Sobel test Aroian test Goodman test | 2.2115 * | 0.0135 |
2.1647 * | 0.0152 | ||
2.2615 * | 0.0119 | ||
ROE | Sobel testAroian testGoodman test | 2.3286 ** | 0.0099 |
2.2910 * | 0.0110 | ||
2.3682 ** | 0.0090 | ||
Panel B Dependent Variable (Mediator:StdTurnover) | |||
t-Statistic | p-Value | ||
ROA | Sobel test | 1.6651 * | 0.0480 |
Aroian test | 1.5947 | 0.0554 | |
Goodman test | 1.7456 * | 0.0404 | |
ROE | Sobel test | 1.1392 | 0.1273 |
Aroian test | 1.0669 | 0.1430 | |
Goodman test | 1.2285 | 0.1096 |
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Chang, C.-H.; Lin, H.-W.; Tsai, W.-H.; Wang, W.-L.; Huang, C.-T. Employee Satisfaction, Corporate Social Responsibility and Financial Performance. Sustainability 2021, 13, 9996. https://doi.org/10.3390/su13189996
Chang C-H, Lin H-W, Tsai W-H, Wang W-L, Huang C-T. Employee Satisfaction, Corporate Social Responsibility and Financial Performance. Sustainability. 2021; 13(18):9996. https://doi.org/10.3390/su13189996
Chicago/Turabian StyleChang, Chu-Hsuan, Hsiou-Wei Lin, Wen-Hsien Tsai, Wei-Liang Wang, and Cheng-Tsu Huang. 2021. "Employee Satisfaction, Corporate Social Responsibility and Financial Performance" Sustainability 13, no. 18: 9996. https://doi.org/10.3390/su13189996
APA StyleChang, C.-H., Lin, H.-W., Tsai, W.-H., Wang, W.-L., & Huang, C.-T. (2021). Employee Satisfaction, Corporate Social Responsibility and Financial Performance. Sustainability, 13(18), 9996. https://doi.org/10.3390/su13189996