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The Signaling Effect of Corporate Social Responsibility in Emerging Economies

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Abstract

What signals do firms in emerging economies send to stakeholders when they adopt corporate social responsibility (CSR) practices? We argue that in emerging economies, firms that adopt CSR practices positively signal investors that their firms have superior capabilities for filling institutional voids. From an institution-based view, we hypothesize that the institutional environment moderates the signaling effect of CSR on a firm’s financial performance. Based on a sample of firms from ten Asian emerging economies, we find a positive relationship between CSR practices and financial performance. This positive relationship is stronger in the less developed capital market than in the more developed one. The financial benefits of CSR practices are also more salient in the low information diffusion market than in the high one. We emphasize that signaling theory and the institution-based view can jointly contribute to the CSR literature.

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Acknowledgments

We would like to thank Greg Dess, Craig Macaulay, Brian Pinkham, Steve Sauerwald, Danchi Tan, Eric Tsang and participants at the 2012 Academy of International Business annual meeting (Washington, DC) for the comments and suggestions on earlier versions of this work. This work has been supported in part by the Jindal Chair at UT Dallas.

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Authors and Affiliations

  1. Department of International Business, College of Commerce, National Chengchi University, 64, Sec 2 Zhinan Rd, Taipei, 11605, Taiwan

    Weichieh Su

  2. Jindal School of Management, University of Texas at Dallas, 800 West Campbell, SM 43, Richardson, TX, 75080, USA

    Mike W. Peng

  3. School of Business, Hong Kong Baptist University, Kowloon Tong, Hong Kong SAR

    Weiqiang Tan

  4. Hong Kong Institute of Education, Tai Po, Hong Kong SAR

    Yan-Leung Cheung

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  1. Weichieh Su
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Su, W., Peng, M.W., Tan, W. et al. The Signaling Effect of Corporate Social Responsibility in Emerging Economies. J Bus Ethics 134, 479–491 (2016). https://doi.org/10.1007/s10551-014-2404-4

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