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The impact of corporate social responsibility on firm performance the case of in vietnamese companies

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Tiêu đề The Impact of Corporate Social Responsibility on Firm Performance: The Case of Vietnamese Companies
Tác giả Tran Phuoc Loc
Người hướng dẫn Prof. Dr. Nguyen Trong Hoai
Trường học University of Economics Ho Chi Minh City
Chuyên ngành Development Economics
Thể loại thesis
Năm xuất bản 2016
Thành phố Ho Chi Minh City
Định dạng
Số trang 95
Dung lượng 387,86 KB

Cấu trúc

  • UNIVERSITY OF ECONOMICS ERASMUS UNVERSITY ROTTERDAM HO CHI MINH CITY INSTITUTE OF SOCIAL STUDIES

  • MASTER OF ARTS IN DEVELOPMENT ECONOMICS

  • HO CHI MINH CITY, NOVEMBER2016

  • DECLARATION

  • ACKNOWLEDGEMENTS

  • ABBREVIATIONS

  • ABSTRACT

  • TABLE OF CONTENTS

  • LIST OF TABLES

  • LIST OF FIGURES

  • CHAPTER I INTRODUCTION

    • 1.1 Problem statement

    • 1.2 Research objectives

    • 1.3 Research questions

    • 1.4 Research scope

    • 1.5 Research methodology

    • 1.6 The structure of this study

    • 2.1 Corporate Social Responsibility

    • 2.2.2 Measurement of CSR

    • 2.2 Firm Performance

    • 2.2.2 Measurements of firm performance

    • 2.3 Corporate Social Responsibility and Firm Performance

    • Effects of CSR on Performance

    • 2.3.2 Empirical review

    • CHAPTER 3

      • 3.1 Data collection

      • 3.1.1 Vietnam Enterprise Survey

      • 3.1.2 Vietnam Technology and Competitiveness Survey

      • Section Descriptions

      • Corporate Social Responsibility (CSR)

      • 3.1.3 Data sample in this study

      • Firm Size Number of employees No. of obs

      • 3.1.4 Corporate Social Responsibility Index (CSR Index)

      • CSR Indicators CSR Index Type

      • Management (beyond compliance) Management Index

      • Community (beyond compliance) Community Index

      • 3.2 Variables and measurements

      • 3.2.2 Explanatory variables

      • 3.2.3 Control variables

      • Firm size

      • Firm age

      • R&D Engagement

      • Leverage

      • Export

      • Final good ratio

      • Firm ownership

      • Variable Definitions and Measurements

      • Explanatory Variables

      • Control Variables

      • 3.3 Conceptual framework and model specification

      • 3.3.2 Model specification

      • Model 1 - Determinants of CSR

      • Model 2 - The impacts of CSR on firm performance

      • 3.4 Analytical approach

    • CHAPTER 4

      • 4.1 Overview of Corporate Social Responsibility and performance in Vietnam

      • 4.2 Descriptive analysis results

      • Labor (compliance)

      • Management (beyond compliance)

      • Community (beyond compliance)

      • Number of observations

      • 4.3 Empirical results

      • Model Prob>chi2 Reject H0 Model to be employed

        • 4.3.2 Effects of CSR on Firm Performance

    • CHAPTER 5

      • 5.1 Main findings

      • 5.2 Policy implications

      • For the Government:

      • For enterprises:

      • 5.3 Limitations of the thesis

      • 5.4 Future research

    • APPENDIX

      • Appendix 1: Regression results for Fixed Effect Model

      • Appendix 2: Hausman test results

      • Appendix 3: Awareness of CSR questionnaires on the Baseline Survey Report 2010

Nội dung

Problem statement

In recent decades, the social impact of enterprises has become increasingly important in economics and management, with the primary goal of businesses still being profit maximization Performance is influenced by a company's strategic decisions, leading to a critical question among researchers: how can firms balance social and environmental responsibilities while meeting financial objectives? This inquiry has given rise to the concept of Corporate Social Responsibility (CSR), which offers a framework for addressing both social and environmental challenges.

Corporate Social Responsibility (CSR) encompasses the efforts of businesses to address social concerns and meet societal expectations (Gossling & Vocht, 2007) Historically, CSR was dismissed by investors and scholars until the late 1970s, when it began to gain traction (Lydenberg, 2005) Since the 1990s, CSR has been increasingly embraced and advocated by governments, corporations, and individuals alike.

Corporate Social Responsibility (CSR) has become a vital concept in management, economics, and corporate theory, focusing on the social and environmental impacts of business operations Defined by Carroll as a framework for firms to operate profitably and ethically, CSR emphasizes the importance of legal compliance and moral accountability While companies once sought competitive advantages through product diversification and quality improvements, the current trend is toward enhancing their brand image through responsible practices.

Adopting Corporate Social Responsibility (CSR) activities is crucial for enhancing a company's reputation and brand development Customers increasingly prioritize businesses that contribute positively to society and the community Understanding the connection between CSR and a firm's performance can empower managers, stockholders, and stakeholders to make more informed decisions.

Numerous studies explore the relationship between Corporate Social Responsibility (CSR) and firm performance, with many indicating a positive correlation (Karaye et al., 2014; Margolis & Walsh, 2003; Orlitzky et al., 2003), while some suggest negative or neutral effects (Wright & Ferris, 1997; McWilliams & Siegel, 2000) This disparity fuels scholarly interest in understanding the true dynamics between CSR and performance Most empirical research has focused on developed nations, particularly the US and Europe, where CSR practices are well-established (Belal, 2001; Gray et al., 1995) Conversely, there is a notable scarcity of empirical studies on CSR in developing countries, as highlighted by Hopper and Hoque (2004), which presents an opportunity for researchers to investigate CSR-performance relationships in regions like ASEAN.

(2007) argue that the ASEAN would achieve major focus on CSR study since the early 2000s.

The concept of Corporate Social Responsibility (CSR) was first introduced to Vietnamese enterprises by transnational corporations, as noted by the Vietnam Chamber of Commerce and Industry (VCCI) (Nguyen, 2007) By 2003, the Vietnamese government recognized the importance of CSR through the World Bank program aimed at enhancing government engagement with CSR in developing countries (Twose and Rao, 2003) The country's accession to the WTO in 2007 marked a significant step towards globalization and the adoption of CSR practices In this context, both the Vietnamese government and enterprises play crucial roles in promoting CSR, with the government responsible for enacting and enforcing policies, while enterprises focus on implementing CSR initiatives.

The Vietnamese government has enacted new laws and regulations to enhance Corporate Social Responsibility (CSR) practices, including the Environment Protection Law and updates to the labor code and union laws to better support employees In 2004, the government introduced a Strategic Orientation aimed at Sustainable Development, focusing on 19 strategic areas that align with economic, social, and environmental CSR criteria This initiative is expected to bolster the government's role in CSR activities and pave the way for "Green Growth" strategies from 2011 to 2020.

Enterprises play a crucial role in the success of Corporate Social Responsibility (CSR) as they are responsible for implementing CSR activities Without a commitment to social responsibilities, companies may prioritize profit maximization, potentially leading to negative societal impacts, such as environmental degradation A notable example is the Vedan case, where a Taiwanese food manufacturer was penalized in 2008 for illegally discharging waste into the Thi Vai River over a 14-year period Thus, firms must recognize their social responsibilities to benefit themselves and prevent harmful actions The United Nations Industrial Development Organization (UNIDO) has been instrumental in promoting CSR among Vietnamese firms through a project aimed at helping SMEs "Adapt and Adopt CSR for Improved Linkages with Global Supply Chains in Sustainable Production." Funded by the European Union and in collaboration with the VCCI, this initiative seeks to enhance CSR awareness and standards among Vietnamese SMEs, ultimately boosting their competitiveness in international markets.

In Vietnam, the pressure of globalization has prompted large enterprises to engage in Corporate Social Responsibility (CSR) activities, yet over 90% of firms are small and medium-sized, often overlooking CSR as a vital requirement This situation highlights the unclear benefits of CSR adoption within the country Furthermore, research on CSR topics in Vietnam remains limited, indicating a need for empirical studies to explore its impact on firm performance This study utilizes firm-level data and quantitative analysis to identify the factors influencing CSR adoption and to investigate whether CSR engagement can enhance financial performance for firms in Vietnam.

Research objectives

The main objectives of this study are:

 To investigate the determinants of CSR adoption of Vietnamese firms.

 To empirically examine the relationship between CSR and firm performance in term of three CSR perspectives: Labor, Management, and Community.

Research questions

In order to achieve the research objectives, this study attempts to answer two questions:

 What are the key factors that may affect the adoption of CSR?

 Whether CSR has positive impacts on performance of Vietnamese firms?

Research scope

This study investigates the impact of Corporate Social Responsibility (CSR) activities on the performance of firms in Vietnam Data for the analysis is sourced from the Vietnam Technology and Competitiveness Survey (TCS) and the Vietnam Enterprise Survey (VES) conducted between 2010 and 2020.

This research, conducted in 2012, exclusively examines firm performance through financial indicators, intentionally excluding other dimensions such as economic and social performance Consequently, the term "performance" within this study specifically refers to the financial performance of the firm.

Research methodology

This study conducts a quantitative analysis of panel data from Vietnamese firms sourced from the Vietnam Technology and Competitiveness Survey (TCS) It explores the impact of Corporate Social Responsibility (CSR) on firm performance over a three-year period, utilizing both the Fixed Effect Model (FEM) and Random Effect Model (REM) for econometric evaluation Following the regression analysis, the Hausman test is employed to ascertain the suitability of FEM compared to REM.

The structure of this study

This study consists of five chapters which are constructed as follows:

 Chapter 1 presents the overview and problem statement about CSR practice and reasons to select the topic, research objectives, research scope and methodology.

Chapter 2 explores the theoretical and empirical literature on Corporate Social Responsibility (CSR) and its impact on firm performance It defines key concepts, outlines major theories surrounding CSR, and summarizes significant empirical findings from notable studies on the CSR-performance relationship This foundational knowledge serves as the basis for the conceptual framework developed in this study.

 Chapter 3 reveals the data, methodology and measurements of variables to establish the econometric models based on the conceptual framework.

 Chapter 4 presents the overview of CSR practice in Vietnam, descriptive statistics, as well as regression results of the study.

 Chapter 5 expresses the main findings, policy implementations based on the key findings In addition, this part also discusses the research limitations and future development of the topic.

This chapter explores the theoretical and empirical literature on corporate social responsibility (CSR) and its impact on firm performance It begins by defining and measuring both CSR and financial performance Additionally, it presents relevant theories and empirical studies to provide a comprehensive overview of the CSR-performance relationship in practice.

Corporate Social Responsibility

Definitions

Despite decades of research, a clear and universally accepted definition of Corporate Social Responsibility (CSR) remains elusive (Wood, 2010) This ambiguity can be attributed to varying perspectives on CSR that reflect specific interests (Van Marrewijk, 2003) Additionally, the difficulty in conceptualizing CSR is compounded by ongoing debates surrounding related concepts such as Corporate Social Performance (CSP) and Corporate Social Responsiveness (Wood, 2010).

Inconsistent definitions of Corporate Social Responsibility (CSR) have led to confusion surrounding the concept, making empirical research on CSR increasingly challenging (Lozano, 2008; Orlitzky, Siegel, & Waldman, 2011).

Almost all definitions of Corporate Social Responsibility (CSR) emphasize that businesses must align their management strategies with societal expectations (Gossling & Vocht, 2007) This principle is applicable from both the perspective of large organizations and academic scholars According to the World Bank, fulfilling these social responsibilities is essential for sustainable business practices.

Corporate social responsibility (CSR) is the dedication of businesses to foster sustainable economic growth by collaborating with employees, their families, and the broader community to enhance quality of life in ways that benefit both business interests and societal development According to Business for Social Responsibility (2000), CSR encompasses these principles of engagement and improvement.

Achieving commercial success while honoring ethical values and respecting individuals, communities, and the environment is essential According to the Commission of the European Communities (2001), Corporate Social Responsibility (CSR) is defined as a concept in which companies voluntarily integrate social and environmental concerns into their business operations and stakeholder interactions.

Corporate Social Responsibility (CSR) is defined by McWilliams and Siegel (2001) as actions aimed at promoting social good beyond legal requirements, while Frooman (1997) emphasizes that CSR involves voluntary actions by firms that significantly impact social stakeholders' welfare These definitions highlight that CSR initiatives extend beyond legal obligations to address societal and stakeholder interests Carroll (1979) further refines CSR into four categories: economic, legal, ethical, and discretionary expectations, offering a comprehensive framework that clarifies a firm's social responsibilities This conceptualization distinguishes between profit-making endeavors and the ethical obligations of management, providing a clearer understanding of CSR's role in business practices.

A socially responsible corporation goes beyond legal obligations to meet the expectations of its key stakeholders Corporate Social Responsibility (CSR) encompasses a holistic approach that integrates a company's business operations with social and environmental considerations through various programs, policies, and mindsets.

Measurement of CSR

The literature on Corporate Social Responsibility (CSR) highlights significant challenges in measuring a firm's social performance due to varying definitions of CSR, leading to a lack of consensus on measurement methods (Graves & Waddock, 1994) Many studies rely on extra-financial ratings from agencies like Kinder, Lydenberg, Domini & Co., Inc (KLD) in the US and Vigeo in Europe, with the KLD index being particularly prominent for assessing CSR adoption among US firms This index is derived from a comprehensive KLD database that includes surveys, financial statements, government reports, and academic journals to evaluate multiple dimensions of Corporate Social Performance (CSP) Numerous studies have utilized the KLD Index as a measurement tool for CSR (Waddock & Graves, 1997; McWilliams & Siegel, 2000; Garcia-Castro et al., 2010).

In countries outside the US where KLD data is unavailable, researchers often rely on secondary data from various surveys to assess Corporate Social Responsibility (CSR) performance According to Ghauri and Gronhaug (2005), secondary data not only aids in addressing research problems but also enhances understanding of these issues Unlike extra-financial ratings, secondary data offers a complementary perspective on Corporate Social Performance (CSP) by reflecting actual company activities rather than evaluations from external agencies Consequently, the CSR Index, derived from secondary data, has become a widely used measure for assessing CSR.

Firm Performance

Definitions

In contemporary business and management strategies, firm performance is regarded as a critical concept essential for survival and stakeholder satisfaction Despite extensive literature recognizing firm performance as a key dependent variable, a universally accepted definition remains elusive.

The lack of consensus and varying measurement methods in performance-related studies can lead to inconsistent results (Johnson, 2009) Glick, Washburn, and Miller (2005) note that researchers often rely on limited indicators to assess firm performance, primarily due to the absence of critical variables in available datasets.

Firm performance is a complex, multi-dimensional construct that encompasses financial performance, business performance, and organizational effectiveness, as categorized by Venkatraman and Ramanujam (1987) Financial performance is evaluated through various accounting-based indicators such as return on assets (ROA), return on equity (ROE), and return on sales (ROS), which reflect a firm's profitability and financial health Business performance, a key focus in management studies, combines financial and operational metrics, with indicators like sales growth, market share, and product development Lastly, organizational effectiveness is a critical dimension of firm performance that assesses how well an organization achieves its goals and objectives.

10 efficiency of firm’s business operation to achieve its objectives It attempts to capture firm performance through leadership, firm's structure, quality, employee's satisfaction, etc.

Measurements of firm performance

Previous studies suggests that firm performance can be measured by either productivity or profitability:

Firm productivity is a key indicator of a firm's production efficiency, defined as the ratio of useful output to the physical inputs utilized According to Lieberman and Kang (2008), productivity can be assessed through single-factor, multi-factor, or total-factor productivity ratios While single-factor productivity focuses on individual elements like capital, labor, or materials, total-factor productivity encompasses all production factors, providing a more comprehensive view of a firm's production capabilities Relying solely on single or multi-factor productivity measures may not accurately represent a firm's overall productivity and could result in misleading analytical outcomes.

Firm profitability is assessed using accounting indicators like Return on Assets (ROA) and Return on Equity (ROE) to evaluate a company's financial health While these metrics provide a broad view of performance, they may overlook the complexities of multinational production processes According to Orlitzky et al (2003), both accounting and market indicators are valuable for measuring a firm's performance This study focuses on the effects of Corporate Social Responsibility (CSR) on financial performance, making overall financial indicators a fitting choice for analysis Consequently, measuring profitability is integral to the methodology employed in this research.

Corporate Social Responsibility and Firm Performance

Theoretical review

Numerous well-known theories have explored the relationship between Corporate Social Responsibility (CSR) investment and a firm's financial performance This section provides a summary of key theories from foundational concepts to more complex frameworks in prior CSR research.

Shareholder Theory: Shareholder theory may be considered as the first theory about

The concept of Corporate Social Responsibility (CSR) has evolved in response to criticisms of traditional profit-maximization theories, particularly those proposed by Friedman (1962, 1970), which argue that a firm's primary goal is to maximize shareholder wealth without the obligation of social responsibility This shareholder-centric view has faced significant criticism from various scholars and stakeholders, leading to the development of alternative theories such as Agency Theory, Stakeholder Theory, and the Pyramid Model of CSR, which advocate for a broader understanding of a firm's responsibilities beyond mere profit generation.

Agency Theory: this theory would be first developed by Jensen and Meckling

The agency perspective highlights the inherent conflict of interest between shareholders and firm managers, commonly referred to as the "agency problem" (Jensen and Meckling, 1976) This conflict arises because the interests of shareholders and managers rarely align, leading to potential misallocation of corporate resources Managers may prioritize their own wealth over investments that could enhance the firm's financial performance, resulting in detrimental effects on both corporate social responsibility (CSR) initiatives and shareholder wealth (Krisnawati et al., 2014) Consequently, it is essential for CSR investments to be strategically directed towards improving firm performance rather than enriching managers To address the agency problem, theories such as Stakeholder Theory and Stewardship Theory have emerged, advocating for a more balanced approach to managing diverse interests within a firm.

Stakeholder Theory posits that, contrary to earlier views suggesting a negative link between corporate social responsibility (CSR) and firm performance, later research highlights the positive impact of CSR on performance Notably, Freeman's stakeholder perspective emphasizes the importance of considering all stakeholders in a company's strategy, ultimately leading to improved business outcomes.

The survival of a firm hinges on its ability to satisfy stakeholders, including customers, employees, and suppliers, who significantly influence its welfare (1984) This stakeholder theory, widely embraced by researchers, suggests that firms should engage in Corporate Social Responsibility (CSR) activities to benefit both financial and non-financial stakeholders (Blombọck & Wigren, 2009) Clarkson (1995) emphasizes that enhancing wealth and value for stakeholders is essential for a firm's prosperity Jensen (2002) introduced the value maximization concept, aligning stakeholder theory with the long-term value of the firm, asserting that maximizing firm value is the primary goal while also addressing stakeholder interests This perspective shifts away from conflicting objectives, promoting a harmonious approach to stakeholder engagement.

Instrumental Stakeholder Theory, rooted in Freeman's foundational work from 1984, has significantly influenced subsequent theories (Margolis & Walsh, 2003) Donaldson and Preston (1995) classify Stakeholder Theory into three categories: descriptive, normative, and instrumental Among these, Instrumental Stakeholder Theory has garnered considerable attention from researchers (McWilliams and Siegel, 2001; Surroca et al., 2010).

Instrumental Stakeholder Theory, as discussed in 1995, posits that social activities serve as tools for profit maximization and enhancing shareholder wealth Essentially, Corporate Social Responsibility (CSR) initiatives are viewed as social actions that contribute to the financial gains of a firm's stakeholders, ultimately benefiting shareholders This study emphasizes the economic advantages that arise when companies engage in activities that support diverse stakeholder groups.

The resource-based view of the firm (RBV), initially proposed by Wernerfelt in 1984, posits that a company's diverse resources—including assets, attributes, and knowledge—can be leveraged to achieve sustainable competitive advantage This theory emphasizes the importance of allocating resources to fulfill corporate social responsibility (CSR) demands Building on earlier work by Penrose (1959) and further expanded by Barney in 1991, the RBV identifies four essential criteria for sustainable competitive advantage: resources must be valuable, rare, inimitable, and non-substitutable Hart (1995) first applied the RBV framework to CSR, suggesting that environmental social responsibility can serve as a vital resource for firms Additionally, Russo and Fouts (1997) demonstrated that high environmental performance correlates with improved financial outcomes, reinforcing the notion that CSR can enhance a firm's competitive edge and overall performance.

Slack resources hypothesis: This theory is first presented by Waddock and Graves

In 1997, Waddock and Graves proposed that firms with superior financial performance possess greater capacity to tackle social issues, suggesting a reciprocal relationship between corporate social responsibility (CSR) and firm performance High-performing companies can invest more in social initiatives, while effective CSR practices contribute to enhanced financial success Consequently, financially successful firms can allocate resources to strategic long-term campaigns addressing environmental challenges and fostering positive employee and community relations By embracing CSR, companies can enjoy long-term advantages, including an improved public image, stronger community relations, and more appealing recruitment opportunities.

In 2012, it was suggested that slack resources are allocated selectively across different social concerns, such as environmental issues and community relations This strategic investment in various areas yields differing levels of outcomes for the company.

Stewardship Theory: Based on the idea of Stakeholder theory, Donaldson and Davis

In 1991, Stewardship theory was introduced to address the agency problem, suggesting that morally principled executive managers are inclined to engage in corporate social responsibility (CSR) activities, irrespective of their impact on firm performance (Krisnawati et al., 2014; Donaldson and Davis, 1991) Muth and Donaldson (1998) further developed this theory, highlighting the necessity of motives to mitigate conflicts of interest between managers and shareholders Managers, viewed as stewards, are tasked with satisfying stakeholders while achieving the firm’s performance targets The alignment of stakeholder interests with managerial goals leads to an equilibrium that serves as the ultimate objective of effective stewardship.

Stewardship Theory This approach tends to contrast with the agency theory in term of manager’s motivation to participate in CSR activities.

The Pyramid Model of CSR, developed by Carroll (1991) based on Shareholder Theory, posits that a firm's primary objective is profit maximization, but this responsibility extends beyond mere profit The model comprises four layers of responsibility: economic, legal, ethical, and philanthropic At the base, the economic layer is crucial, aligning with Friedman’s Shareholder Theory, as profits must be generated for shareholders before addressing subsequent responsibilities The second layer, legal, mandates compliance with governmental laws and regulations The ethical layer emphasizes the firm's duty to engage in "good" practices that satisfy stakeholders, while the top philanthropic layer reflects the firm's contributions to the community Carroll argues that adherence to all four responsibilities is essential for achieving profits and long-term success, establishing a foundation for more complex CSR models that build on his framework.

Figure 2.1: The Pyramid Model of CSR

Recent theories indicate that Corporate Social Responsibility (CSR) generally has a positive impact on a firm's performance, particularly over the long term Theoretical literature supports the existence of a causal relationship between CSR and financial performance, suggesting that social performance can significantly influence a firm's overall success Table 2.1 provides a summary of the various theories related to CSR discussed in this study.

Theoretical perspective(s) Key argument/result

The main goal of firm is to maximize

Effects of CSR on Performance

Theory shareholders' wealth; firm should not conduct any activities that are beyond earning profits

CSR is considered as a tool for managers to exploit firm's resources; there is possible conflicts of interest between managers and shareholders

Besides the goal of gaining profits for stockholders, firms should participate in CSR activities to satisfy other stakeholders who could provide strong support for firms

Stewardship Theory social responsibility would create competitive advantage and thus increase firm’s performance

Firm with high financial performance would be able to afford more on social issues whereas CSR also enables firm to achieve more success in financial perspective

Moral managers tend to lead firm to attend CSR activities regardless of the effects of CSR on firm performance This model introduces four layers of

Model of CSR social responsibility that a firm should follow: economic, legal, ethical and philanthropic criteria

CSR may include social activities that benefits firm’s stakeholders in term of maximizing profits for shareholders

Empirical review

The impact of CSR on firm’s performance has been discussed in a large number of empirical studies However, the results from those studies have been very mixed and do not

Author(s) reach to a consensus about whether and how CSR engagement would lead to better performance (Orlitzky et al., 2003; Luo et al., 2015) For instance, Margolis and Walsh

A comprehensive review by (2003) analyzed 109 empirical studies from 1972 to 2002, exploring the connection between Corporate Social Responsibility (CSR) and firm performance The findings revealed that 54 studies demonstrated a positive relationship, while 28 indicated insignificant correlations Only 7 studies suggested a negative relationship, and 20 papers presented mixed results Additionally, research by Margolis et al further contributed to this body of knowledge.

A comprehensive analysis conducted in 2007 reviewed 167 papers over a 35-year period, revealing a positive yet modest impact of Corporate Social Responsibility (CSR) on firm performance The study emphasizes the need for future theoretical and empirical research to deepen our understanding of why companies adopt CSR, the strategies they implement, and the mechanisms that connect CSR initiatives to enhanced performance (Garcia Castro et al., 2010).

In fact, there is a large number of papers that present the positive nexus between CSR and firm performance (Johnson & Greening, 1999; Waddock & Graves, 1997; Lo et al.,

The ongoing debate among economic researchers regarding the relationship between social performance and firm performance remains unresolved, as some studies indicate a negative correlation or no correlation at all (Bromiley & Markus, 1989; Barla, 2007) Conflicting results can be attributed to factors such as the lack of reliable measurements for social performance and the omission of key variables that may influence this relationship (Reverte et al., 2015; Surroca et al., 2010; García-Castro et al., 2010) For instance, McWilliams and Siegel (2000) highlight that excluding innovation-related variables can lead to model misspecifications and unreliable findings Numerous studies also explore the mediating role of innovation in the connection between social performance and firm performance (Lockett et al., 2006) Additionally, it is important to note that firm performance is often viewed as a short-term outcome, while corporate social responsibility (CSR) emphasizes long-term, qualitative benefits such as reputation, customer satisfaction, and brand image.

Different motives behind Corporate Social Responsibility (CSR) adoption can lead to varying CSR-performance outcomes within firms According to Bénabou and Tirole (2010), firms engage in CSR for three primary reasons: altruism, strategic policy, and greenwashing Baron (2001) suggests that the altruistic motive, which focuses on helping others, may negatively impact firm performance In contrast, the strategic motive aims to increase profits, potentially enhancing performance Greenwashing, as noted by Frankental (2001), allows firms to improve their brand image by falsely portraying their products as environmentally friendly, leading to better performance without significant operational changes Thus, the motives driving CSR engagement can significantly influence a firm's financial performance.

Previous empirical studies on the impact of Corporate Social Responsibility (CSR) on financial performance can be divided into two categories The first category focuses on the short-term financial effects of CSR engagement, often using event study methodology However, findings in this area have been inconsistent; for example, Wright and Ferris (1997) identified a negative relationship, while Posnikoff (1997) reported a positive one As a result of these varying outcomes, a definitive conclusion regarding the influence of CSR on short-term performance or abnormal returns remains elusive (McWilliams & Siegel).

The second type of research on corporate social responsibility (CSR) examines its long-term effects on financial performance, often assessed through financial or accounting-based indicators These studies typically adopt a quantitative approach, yielding varied results For instance, Cochran and Wood (1984) utilized three accounting metrics to evaluate a firm's performance.

The study examines the relationship between Corporate Social Performance (CSP) and firm performance by analyzing key financial ratios, including returns on assets (ROA), returns on sales (ROS), and excess market value By incorporating the age of assets as a control variable, the research addresses potential spurious relationships between CSP and performance, revealing that while the positive correlation between CSR and firm performance is confirmed, its impact diminishes when asset age is considered Additionally, Waddock and Graves (1997) utilize firm-level data from the S&P 500 to create a weighted CSP Index, which serves as the primary explanatory variable in regression analyses alongside ROA, ROE, and ROS as dependent variables The findings indicate that the CSP Index positively influences financial performance, even when accounting for control variables such as firm size, risk, and industry.

Lin et al (2009) conducted a study on 1,000 Taiwanese firms committed to CSR and R&D from 2002 to 2004, revealing that while CSR initially appears to positively impact financial performance, its benefits are predominantly seen in the long term rather than the short term Aupperle et al (1985) further explored this relationship using a forced-choice survey to analyze the effects of CSR on risk-adjusted returns on assets (ROA) over one and five years, indicating that CSR measures, represented by an overall firm-level CSR Index, do not show a statistically significant relationship with a firm's performance.

Endogeneity issues may explain the varying results in research on the relationship between Corporate Social Responsibility (CSR) and firm performance Margolis and Walsh (2003) highlight that many studies focus on the direct correlation between CSR and performance, typically using regression analysis on metrics like Tobin’s Q and return on equity However, this approach often overlooks interacting factors, leading to inconsistent and unreliable results (Wood, 2010) Model misspecification or endogeneity can produce biased coefficients, particularly if CSR correlates with unobserved firm characteristics that also affect performance Additionally, the causal relationship remains debated: does CSR engagement enhance performance, or do high-performing firms have the resources to invest in CSR? (Fodio et al., 2013) Despite these controversies, the prevailing perspective supports a positive relationship between CSR and firm performance, as indicated by most empirical studies and theoretical arguments The next chapter will detail data collection and construct empirical models to explore the CSR-performance nexus in Vietnam.

This chapter outlines the research methodology of the thesis, beginning with the data collection process and essential details about the studied data It then introduces the conceptual framework, defines key variables, and presents empirical models to address the research questions Lastly, the chapter concludes with a discussion of the estimation methods and the criteria for selecting alternative regression models.

Data collection

Vietnam Enterprise Survey

The Vietnam Enterprise Survey (VES), conducted annually by the General Statistics Office of Vietnam (GSO), gathers comprehensive firm-level data from nearly all existing businesses and agencies across the country Since its inaugural publication in 2000, the VES has included various types of firms, such as foreign, state, and non-state enterprises, spanning all 63 provinces and cities in Vietnam The survey's quality and the number of questions have consistently improved over the years, making it a reliable resource for investigating the business sector in Vietnam.

This study employs information about firm characteristics such as firm performance, total assets, leverage … from VES 2011- 2013 to obtain firm-level data between the years

This study utilizes data from the Vietnam Technology and Competitiveness Survey (TCS) spanning 2010 to 2012, while the Value-Added Survey (VES) covers the years 2011 to 2013 Consequently, the firm characteristics analyzed in this research pertain specifically to the years 2010 to 2012 The integration of firm-level information with Corporate Social Responsibility data creates a comprehensive panel dataset for the specified period.

Table 3.1: Number of firms surveyed in VES and TCS dataset from 2010 to 2012.

Vietnam Technology and Competitiveness Survey

The Vietnam Technology and Competitiveness Survey (TCS), part of the Vietnam Enterprise Survey, focuses on firm innovation and technology, having been released annually since 2010 through collaboration among the Central Institute for Economic Management (CIEM), the General Statistics Office (GSO), the Development Economics Research Group (DERG), and the University of Copenhagen Unlike the Vietnam Enterprise Survey (VES), which provides general enterprise characteristics, TCS delves into technology, innovation, and Corporate Social Responsibility (CSR) TCS serves as a specialized extension of VES, with its firms constituting a subset of the VES dataset This research aims to analyze CSR practices within the TCS dataset, utilizing YES/NO questions to create dummy variables for calculating a CSR Index, which will serve as a key explanatory variable in the regression models of the study.

Table 3.2: Structure of Survey Questionnaires in TCS

Taking stock of technologies and technological basis

Capturing the status-quo of the firm’s level of technological investment and sophistication through questions about the age, cost, and type of current production technologies.

The details of major suppliers’ locations and the value of inputs obtained, differentiated across domestic and international suppliers.

The details of major customers’ locations and value of outputs sold, differentiated between domestic and international customers.

Diagnostic questions targeting the constraints affecting technology adaptation and level of the firms’ investment in technology transfers or research and development.

Competitors Number and location of competitors, and dimensions (cost / quality) along which competition occurs.

(CSR) Questions relating to formal and informal commitment to CSR practices.

Source: Vietnam Technology and Competitiveness Survey

Data sample in this study

The TCS data, often viewed as a subset of VES data, has been merged with VES to derive common observations for the years 2010, 2011, and 2012, yielding results of 7707, 8636, and 7931, respectively Subsequently, the annual data was combined to form a robust balanced panel dataset.

2010 to 2012 After removing for all outliers, the final dataset includes 6435 Vietnamese enterprises with 19305 observations.

This research categorizes firms in the dataset based on their size and ownership structures to investigate their characteristics The classifications of firm size and ownership are detailed in Tables 3.3 and 3.4, respectively.

Table 3.3: Categories of firm size

Firm Size Number of employees No of obs

Table 3.4: Categories of ownership type

Firm Ownership Definition No of obs

State Wholly state-owned enterpris stock companies with state in es; joint volvement 267

Private Private firms; private limited companies; collective liability

Joint Stock Joint stock companies withou involvement t state

Corporate Social Responsibility Index (CSR Index)

The Vietnam Technology and Competitiveness Survey evaluates Corporate Social Responsibility (CSR) in Vietnam by categorizing activities into three key areas: labor support and environmental standards, management criteria and commitment, and charity and community-based initiatives Each category includes specific indicators to assess CSR engagement by tallying the number of CSR activities undertaken by each firm The individual CSR Index reflects the total number of CSR activities per firm within a particular aspect.

The individual CSR Index is calculated by aggregating various CSR indicators from the survey The overall CSR Index for a specific firm reflects the combined scores of three sub-components: labor, management, and community According to the TCS structure, the Total CSR Index can vary from 0 to 16 Table 3.3 provides a summary of all indicators that make up the indexes for each of the three CSR components in the TCS survey.

Labor or "compliance" indicators represent the mandatory legal obligations that firms must fulfill, including the provision of labor contracts, trade union committees, and social and health insurance for employees In contrast, management and community components are considered "beyond compliance." Managerial responsibilities encompass four criteria that assess a firm's strategy in adopting Corporate Social Responsibility (CSR), such as the presence of a CSR supervision mechanism, CSR policies, a CSR committee, and recognition through CSR awards Additionally, community-related CSR components encourage firms to engage in social activities that may not yield direct benefits to the company and are not legally required.

Table 3.5: Corporate Social Responsibility (CSR) Indicators

CSR Indicators CSR Index Type

1 All permanent employees have a written labor contract?

2 Enterprise has a local/plant level trade union?

3 Enterprise pays contribution to social insurance for employees?

4 Enterprise pays contribution to health insurance for employees?

Management (beyond compliance) Management Index

1 Has committee/board overseeing CSR practices?

2 Has written down CSR policy?

3 Member of groups or has agreements that promote CSR standards?

4 Has been awarded CSR type certifications or awards?

Community (beyond compliance) Community Index

Source: Vietnam Technology and Competitiveness Survey

Variables and measurements

Dependent variables

This research explores the relationship between corporate social responsibility (CSR) activities and firm performance, focusing solely on financial performance due to dataset limitations Previous studies, as noted by Orlitzky et al (2003), often utilize both accounting and market-based indicators to analyze the CSR-performance nexus, each offering distinct implications for economic theories (Hillman & Keim, 2001) While accounting measures may be constrained by historical data and potential manipulation by managers (Branch, 1983), market-based indicators reflect investors' evaluations of a firm's profit-generating capabilities, making them more reliable (McGuire et al., 1988) Tobin's Q, a widely used market measure calculated as the ratio of a firm's market value to its book value or replacement cost, is particularly favored because it does not necessitate measuring the rate of return (Oba, 2009).

Due to the unavailability of market value data in the VES and TCS surveys, this study employs two accounting measures—return on assets (ROA) and return on equity (ROE)—to evaluate firm financial performance ROA, calculated by dividing net income by total assets, indicates how effectively a firm utilizes its assets to generate profit, making it a popular proxy for firm performance in empirical research Conversely, ROE measures the profit generated from shareholders' equity, calculated as net income divided by total equity These indicators are extensively used in significant studies, including those by Cochran and Wood (1984), Waddock and Graves (1997), and Wu and Shen (2013).

Explanatory variables

The CSR Index, derived from the Vietnam Technology and Competitiveness Survey, serves as the primary explanatory variable in this study This index is a widely recognized concept and measurement tool employed in various empirical research studies, including those by Wang et al (2015).

This study is pioneering in utilizing CSR-related information within the TCS framework to assess the impact of Corporate Social Responsibility (CSR) on firm performance The CSR Index, ranging from 0 to 16, enables researchers to evaluate the level of CSR engagement among firms in Vietnam Each firm is assigned a unique CSR Index for the years 2010 to 2012, reflecting its participation in CSR activities Consequently, firms with a lower CSR Index engage in fewer CSR initiatives compared to those with a higher index, as detailed in Table 3.5 of section 3.1.4.

Control variables

In addition to the impact of Corporate Social Responsibility (CSR) on firm performance, various components identified in prior theoretical and empirical literature may also affect performance These components serve as control variables and are incorporated into the empirical model to account for heterogeneity at the firm level The study utilizes a comprehensive set of control variables to ensure robust analysis.

Firm size is a critical factor influencing firm performance, leading many studies to include it as a control variable (Surroca et al., 2010; Waddock and Graves, 1997) Research indicates a positive relationship between firm size and corporate social responsibility (CSR) initiatives, as larger firms are often more involved in CSR due to stakeholder pressures (Waddock and Graves, 1997; McWilliams and Siegel, 2000) Additionally, McWilliams and Siegel (2001) note that larger firms may incur lower average costs for CSR activities compared to smaller firms This study defines firm size using the logarithm of total labor, rather than total assets, to account for industry scale differences and mitigate the effects of heteroscedasticity in large figures.

Firm age is a crucial control variable in assessing firm performance and significantly influences corporate social responsibility (CSR) adoption According to Huergo and Jaumandreu (2004), older and more experienced firms are more likely to engage in CSR activities Additionally, Erhemjamts et al (2012) suggest that as firms age, their profit margins may decline, prompting older firms to increase CSR efforts to enhance their brand image and reputation The age of a firm, defined as the number of years in operation, is calculated by subtracting the year of the survey from the firm's establishment year (Saeidi et al., 2015).

Research and development is expected to have positive relationship with firm’s performance In fact, O’Sullivan and Dooley (2008) argues that Research and Development

(R&D) increase firm’s competitiveness while R&D engagement may propose the positive relationship with firm performance (McWilliams & Siegel, 2000) McWilliams and Siegel

Research indicates that various aspects of Corporate Social Responsibility (CSR) can enhance both product and process innovation, ultimately improving long-term firm performance Consequently, studies exploring the CSR-performance relationship often include R&D intensity as a crucial control variable R&D intensity is typically assessed by the ratio of R&D investment to total assets or sales However, due to incomplete data on R&D expenditures for firms in the dataset from 2010 to 2012, this study may utilize a dummy variable to indicate R&D engagement Here, R&D is assigned a value of 1 if a firm engages in R&D activities and 0 if it does not.

Firm leverage serves as a crucial control variable in assessing corporate performance According to Sharfman and Fernando (2008), companies with higher Corporate Social Performance tend to experience increased leverage and bond yields, as socially responsible firms find it easier to secure loans Leverage significantly influences firm performance, with Jensen (1986) highlighting a positive correlation between leverage and performance through the free cash flow hypothesis For the purposes of this study, leverage is specifically defined as the ratio of total debt to total assets, as outlined by Wu and Shen (2013).

Previous research indicates that engaging in exports can improve a firm's social performance (Grolleau et al., 2007) Boehe and Cruz (2010) demonstrate that adopting Corporate Social Responsibility (CSR) can help differentiate products in the export market, thereby boosting both export and overall firm performance Additionally, Bernard et al (2003) highlight that export activities contribute to enhanced firm performance through the "learning by exporting" concept Due to insufficient VES data on export volumes across all sample years, this study utilizes a dummy variable to indicate a firm's export orientation, where export = 1 if the firm engages in export activities and export = 0 if it does not.

The final goods ratio is considered a key determinant of Corporate Social Responsibility (CSR) adoption, as companies that produce final goods are anticipated to engage more in CSR activities to attract potential customers (CIEM, GSO, DERG, UoC, 2015) However, due to a lack of evidence linking this factor to firm performance, it will be excluded from the performance estimation in this study The final goods ratio is defined as the proportion of final products to total output based on sales value.

Research indicates that ownership structure significantly influences firm performance and may also impact corporate social responsibility (CSR) adoption The relationship between a firm's ownership and its performance has been a topic of debate among scholars Studies have generally found a negative correlation between state-owned enterprises (SOEs) and performance, with agency theory suggesting that managers in these firms, often politicians, may prioritize personal gain over the firm's assets Additionally, findings by Boycko, Shleifer, and Vishny (1996) reveal that SOEs tend to be less efficient than private firms, as they often focus on political objectives rather than profit maximization This inefficiency may stem from hiring practices that favor political connections over merit-based qualifications.

Private firms typically demonstrate a positive relationship with performance compared to state-owned enterprises (SOEs) These firms, often smaller in size, can swiftly adapt to market changes, resulting in greater efficiency than their SOE counterparts Additionally, foreign-owned firms are often regarded as the most efficient among all types of businesses.

A study conducted in 2001 examined Chinese industrial firms from 1989 to 1998, revealing a significant correlation between ownership type and firm efficiency The results indicated that state-owned enterprises exhibited the lowest efficiency scores, whereas foreign firms achieved the highest performance levels.

This study categorizes firm ownership types using dummy variables, specifically designating state-owned, private, joint stock, and foreign firms as state, private, joint stock, and foreign, respectively.

Table 3.6: Summary of variables, measurements and expectations

Labor CSR Labor-based CSR Index NA (+)

Management CSR Management-based CSR Index NA (+)

Community CSR Community-based CSR Index NA (+)

Total CSR Aggregated CSR Index NA (+)

= Logarithm of no of employees

= Logarithm of (Surveyed year – established year)

= Tot al Deb t/Total Assets

= 1 if firm has exp ort acti vity

= Sales value of final products/

Conceptual framework and model specification

Conceptual framework

Based on the theoretical and empirical reviews in chapter 2, the interrelationship between Corporate

The conceptual framework presented explores the relationship between Corporate Social Responsibility (CSR) and firm performance, highlighting the significant impacts of CSR on business outcomes To enhance the accuracy of the analysis, the framework incorporates various control variables that have been empirically shown to affect firm performance, thereby minimizing regression bias Detailed definitions and calculations of these control variables will be elaborated in section 3.2.3 Within this framework, CSR is divided into three key sub-components: Labor, among others.

Management and Community aspects These three

(+) (NA) dimensions of CSR may contribute to the total impacts of aggregated CSR on firm performance.

Model specification

This study employs fundamental panel data models to analyze the characteristics of firms that adopt Corporate Social Responsibility (CSR) and, crucially, to assess the impact of CSR on firm performance within the Vietnamese context Consequently, two models will be estimated to derive meaningful insights.

CSR_Index it = β 0 + β.X it + ε it (1)

 CSR_Indexit: the dependent variable would be the Total CSR Index, whose value range from 0 to 16 and calculated based on the indicators presented in Table 3.5.

 εit is the error term.

Xit represents a set of firm-specific characteristics that significantly influence Corporate Social Responsibility (CSR) practices, including firm size (natural logarithm of total labor), firm age (natural logarithm of firm age), ownership types (dummy variables for state-owned enterprises, private firms, foreign firms, and joint stock firms), Research and Development (R&D) adoption (dummy variable), the production of final goods (proportion of final products value to total output), leverage (ratio of total debt to total assets), and export orientation (dummy variable for export-oriented firms) These variables have been identified in prior empirical studies as crucial determinants of CSR and are thus incorporated into the regression model A comprehensive discussion on these factors and their effects on CSR participation and firm performance can be found in section 3.2.3, which reviews relevant literature.

Model 2 - The impacts of CSR on firm performance

Financial_performance it = α i + β * CSR_Index it +à * Control_Variables+ ε it (2)

 Financial_performanceit: the dependent variable would be firm’s financial performance, which is represented by either ROA (return on assets) or ROE (return on equity).

 CSR_Indexit: main explanatory variable (here is the Total CSR Index, which express firm’s level of CSR adoption).

 Control_Variables: a set of firm-level control variables (see section 3.2.3 for more detail about control variables employed in this study).

 εit is the error term.

Analytical approach

This study aims to examine the impact of Corporate Social Responsibility (CSR) on a firm's financial performance over a three-year period from 2010 to 2012, utilizing a panel dataset According to Green (2008), employing panel data offers several advantages for model testing Firstly, it allows researchers to analyze trends and behaviors of firms over time Secondly, it integrates time-series and cross-sectional observations, increasing variability, reducing collinearity among variables, enhancing degrees of freedom, and improving estimation reliability Lastly, panel data is particularly effective for tracking and measuring critical factors that may be overlooked when using only cross-sectional or time-series data, as these factors are often essential to observe annually.

This study employs both descriptive and quantitative analysis alongside a panel dataset to address the research problems To test the main hypotheses, it utilizes the Fixed Effect Model (FEM) and Random Effect Model (REM), the two most popular models for panel data The FEM assumes that individual-specific effects correlate with independent variables, allowing researchers to measure the net effects of explanatory variables on the dependent variable while isolating the effects caused by differences from the predictors (Greene, 2008) Furthermore, FEM is beneficial for controlling bias from omitted variables However, it has limitations, including the inability to observe time-invariant components, such as gender or ethnicity, as these variables are excluded from the model Additionally, if variations among entities are minimal over time, FEM can result in excessively large and intolerable standard errors of the estimates.

The Random Effects Model (REM) assumes that individual-specific effects are uncorrelated with independent variables, enabling the estimation of coefficients for time-invariant variables While REM may yield smaller standard errors compared to the Fixed Effects Model (FEM), it can produce biased estimates in the presence of omitted variable bias Consequently, FEM may be a more suitable choice to address this issue To determine the most appropriate model for the dataset, this study will employ the Hausman test, which assesses whether the REM is effective and consistent or if there are significant differences between the estimates of FEM and REM If the null hypothesis is rejected (p-value < 0.05), it indicates that FEM is the better model; otherwise, REM may be preferred.

When estimating the performance equation (Model 2), two potential sources of endogeneity issues arise: omitted variables and simultaneity The omitted variables issue occurs when certain unobserved factors, not included in the model, significantly influence both CSR measures and firm performance On the other hand, simultaneity bias is present when there is reverse causation, indicating that CSR may depend on firm performance While the Fixed Effects Model (FEM) can effectively mitigate the effects of omitted variable bias, it is limited in addressing the endogeneity arising from simultaneity.

To address simultaneity bias and endogeneity, the Instrument Variable (IV) method is commonly used in economic research, requiring the identification of strong instruments that correlate with the CSR Index but are unrelated to the performance equation's error term Previous studies have employed various instruments, such as sector dummies and prior year income (Fodio et al., 2013), event dummies related to public regulation (Crifo et al., 2016), and a combination of CSR determinants (Erhemjamts et al., 2012) However, in the TCS and VES dataset, suitable instruments that meet the criteria of high correlation with CSR Index and exogeneity concerning firm performance could not be identified, posing a limitation for this research The use of weak instruments could also introduce significant bias in estimations Consequently, the study resorts to basic panel data models like Fixed Effects Model (FEM) and Random Effects Model (REM) for regression analysis, with a Hausman test applied to determine the most suitable model.

CHAPTER 4 RESEARCH FINDINGS AND DISCUSSIONS

Overview of Corporate Social Responsibility and performance in Vietnam

The Corporate Social Responsibility (CSR) landscape in Vietnam is complex due to the diverse range of enterprises across various sectors, regions, and ownership structures In 2014, a significant survey was conducted by the Vietnam Business Council for Sustainable Development (VBCSD) in collaboration with the Vietnam Chamber of Commerce and Industry (VCCI), which involved over 150 leading companies to assess their CSR practices.

A recent study on sustainable development and corporate social responsibility (CSR) reveals that 60.56% of firms recognize three aspects of sustainable development, while only 47.2% possess basic knowledge of CSR Notably, 76.05% of enterprises acknowledge the advantages of sustainability reports and express commitment to CSR initiatives However, the survey highlights that a mere 3.9% of companies are actively gathering data for sustainability reporting Pham (2011) points out that Vietnam encounters significant challenges in CSR implementation, primarily due to insufficient enforcement of policies and regulations, a general lack of understanding of CSR among businesses, and the limited capacity of many small and medium-sized enterprises, for whom CSR is not mandatory.

In 2010, the VCCI-UNIDO project, funded by the EU, aimed to enhance the understanding of Corporate Social Responsibility (CSR) practices among Vietnamese SMEs The initiative conducted a comprehensive survey involving 400 small and medium-sized enterprises to explore various CSR-related issues, ultimately seeking to improve their integration into global supply chains and promote sustainable production.

The collaboration between UNIDO and various Vietnamese partners, including the Vietnam Chamber of Commerce and Industry (VCCI), Vietnam Textile and Apparel Association (VITAS), Vietnam Leather and Footwear Association (LEFASO), and Vietnam Electronics Industry Association (VEIA), aims to support Vietnamese SMEs in integrating into international markets This initiative emphasizes the importance of acknowledging and engaging in Corporate Social Responsibility to enhance competitiveness and sustainability.

To assess a firm's awareness of Corporate Social Responsibility (CSR), a series of statements derived from the ISO Guidance on CSR were provided to the firms The specifics of these statements can be found in Appendix 3 Subsequently, respondents evaluated each CSR statement by selecting one of four levels of importance.

Respondents in the CSR awareness survey can score between 0 and 3 for each statement, resulting in a total possible score ranging from 0 to 60 This scoring system classifies enterprises into four categories: low awareness (0-30), fair awareness (31-40), medium awareness (41-50), and high awareness (51-60) According to the survey results from 400 SMEs in Vietnam, only 4.3% of firms scored low in CSR perception, while over half (53%) achieved a medium score of 41-50 Notably, 28.3% of the respondents demonstrated a high understanding of CSR, indicating that most Vietnamese SMEs possess a basic knowledge of corporate social responsibility.

Source: Baseline Survey Report 2010 (UNIDO, 2011)

Figure 4.2 illustrates the CSR awareness levels across various sectors, including electronics, leather and footwear, and textiles and garment The findings indicate that over 50% of enterprises in each sector possess a medium level of CSR awareness, with similar awareness levels observed across all sectors.

Figure 4.2: Awareness scores by sectors.

Source: Baseline Survey Report 2010 (UNIDO, 2011)

The mean scores for seven topics of social responsibility were calculated to assess awareness levels across various subjects Initially, the overall mean scores for all statements were computed, followed by specific mean scores for each topic As illustrated in Figure 4.3, Vietnamese firms demonstrate a stronger understanding of consumer and labor practices, while awareness regarding community involvement appears to be the lowest This trend is further emphasized in Figure 4.4, which details the awareness levels among the number of firms surveyed.

Figure 4.3: Awareness on topics of social responsibility

Source: Baseline Survey Report 2010 (UNIDO, 2011)

Out of 400 enterprises, 170 demonstrate a strong understanding of consumer-related issues, while 180 excel in labor-related topics In contrast, community responsibilities are often overlooked, with only 118 firms showing a low level of awareness in this area.

Figure 4.4: Awareness on topics of social responsibility – by number of firms

Source: Baseline Survey Report 2010 (UNIDO, 2011)

In summary, various surveys reveal that while most Vietnamese enterprises recognize the concept of Corporate Social Responsibility (CSR), they primarily focus on labor and consumer issues, often neglecting their responsibilities towards the community.

Descriptive analysis results

This study analyzes data from 19,305 observations of 6,435 Vietnamese firms sourced from the TCS and VES datasets According to Table 4.1, a significant percentage of these companies participate in various Corporate Social Responsibility (CSR) practices, with a notable focus on labor-related activities as highlighted in the TCS survey.

From 2010 to 2012, over 96% of firms issued written labor contracts, reaching a full compliance rate of 100% in 2010, reflecting the mandatory nature of these contracts under current laws Additionally, more than half of enterprises established trade unions and contributed to social and health insurance for employees, averaging around 50%, 73.1%, and 73.3% respectively However, participation in Management and Community CSR initiatives remains low, with only about 74% of firms having a written CSR policy and roughly one-fourth engaging in environmental protection activities These findings align with other surveys indicating that Vietnamese companies primarily focus on mandatory CSR compliance, while beyond-compliance practices, such as management and community engagement, see significantly lower participation rates over the three-year period.

Table 4.1: Corporate Social Responsibility (CSR) Indicators by years

1 All permanent employees have a written labor contract?

2 Enterprise has a local/plant level trade union?

3 Enterprise pays contribution to social insurance for employees?

4 Enterprise pays contribution to health insurance for employees?

1 Has committee/board overseeing CSR practices?

2 Has written down CSR policy?

3 Member of groups or has agreements that promote CSR standards?

4 Has been awarded CSR type certifications or awards?

An analysis of Corporate Social Responsibility (CSR) attendance among firms of varying sizes and ownership types is presented in Tables 4.2 and 4.3, which show the average CSR criteria values based on these factors Notably, the maximum values recorded for Labor CSR and Management CSR are four, whereas Community CSR has a maximum value of eight.

Table 4.2: Mean value of CSR aspects by Firm Size

Firm size Labor CSR Management CSR Community CSR Total CSR

The analysis of Labor CSR in Tables 4.2 and 4.3 reveals that Vietnamese firms predominantly prioritize Labor CSR, while Community CSR attracts the least engagement, showing the lowest mean values across all firm sizes and ownership structures Notably, Table 4.2 highlights a positive correlation between firm size and CSR performance, with larger enterprises achieving the highest mean values of 3.79, 1.741, and 0.916 in labor, management, and community criteria, respectively Furthermore, the mean values for CSR aspects consistently decline as the size of the firms decreases.

Table 4.3: Mean value of CSR aspects by Ownership Type

Ownership type Labor CSR Management CSR Community CSR Total CSR

State-owned enterprises (SOEs) engage more in corporate social responsibility (CSR) activities compared to other firms, with mean values of 3.865, 1.891, and 1.438 for Labor, Management, and Community CSR, respectively The Labor mean value of 3.7 indicates that both state-owned and foreign firms actively participate in labor-related initiatives, while many private firms tend to overlook CSR practices.

Table 4.4 summarizes the statistics of key variables in this study, featuring 19,305 observations from 6,435 companies over three years (2010-2012) The average Return On Assets (ROA) is approximately 1.85%, while the average Return On Equity (ROE) stands at 3.56%, both exhibiting significant standard deviations of 5.41% and 9.05%, respectively This variability may stem from the diverse nature of the surveyed enterprises, including differences in firm size, industry, and ownership type The primary explanatory variable, Total CSR, has an average score of about 5 points, with a maximum of 16, whereas Community CSR is notably lower at a mean of 0.783 out of a possible eight, indicating limited focus from Vietnamese firms Among control variables, firm size shows the greatest variation, ranging from zero to 9.953, calculated as the logarithm of employee numbers Additionally, the debt-to-assets ratio averages 44.7%, with a maximum of 98.5%, while other control variables mainly include dummy variables for R&D, export orientation, and ownership types.

Table 4.4: Descriptive Statistics of key variables

Table 4.5 displays the correlation matrix for all variables utilized in the regression model, highlighting that Total CSR is significantly correlated with its sub-components: Labor CSR, Management CSR, and Community CSR Notably, ROA and ROE exhibit a high correlation coefficient of 0.656, attributable to their similar calculation formulas for return on assets and return on equity Furthermore, most other variables show insignificant correlations, as their coefficients fall below 0.6.

Table 4.5: Correlation Matrix of key variables

Empirical results

Determinants of CSR engagement

The analysis of firms engaging in Corporate Social Responsibility (CSR) activities, as presented in Model 1 with the Total CSR Index as the dependent variable, indicates significant findings The regression results from OLS, Random Effects, and Fixed Effects models suggest that the Fixed Effects model is most appropriate, as determined by the Hausman test, which shows a p-value below 0.05 Notably, firm size, R&D involvement, and the output ratio of final goods exhibit statistically significant impacts on the Total CSR Index at the 1% level Larger firms are more likely to engage in CSR activities, aligning with descriptive statistics that show a correlation between firm size and higher Corporate Social Performance (CSP) Additionally, firms that invest in R&D demonstrate a 0.4 point increase in their CSR Index compared to those that do not engage in such activities Furthermore, firms with a higher proportion of final goods production tend to participate more in CSR initiatives, likely aiming to enhance their brand image and foster better customer relations.

The study reveals no significant relationship between firm age, export orientation, and the aggregate CSR Index While leverage demonstrates a marginal correlation at a 10% significance level in the Fixed Effects model, it remains ambiguous Additionally, consistent with the descriptive statistics, state-owned, foreign, and joint stock enterprises are more likely to engage in CSR activities compared to private firms.

Table 4.6: Determinants of CSR participation

Robust standard errors in parentheses

Table 4.7: Summary of Hausman test results for all regressions.

Model to be employed Model 1: Determinants of CSR Adoption

Model 2: Impact of CSR on ROA

Model 2: Impact of CSR on ROE

Effects of CSR on Firm Performance

The regression analysis presented in Tables 4.8 and 4.9 indicates a positive but modest relationship between the aggregate CSR Index and firm performance, as measured by return on assets (ROA) and return on equity (ROE) According to the Hausman test results in Table 4.7, Fixed Effect Models should be applied for both ROA and ROE evaluations Specifically, an increase of one level in the CSR Index correlates with a 0.27 percentage point rise in ROA Additionally, larger firms tend to outperform smaller ones, while factors such as firm age and leverage exhibit a negative correlation with ROA The analysis also reveals that firm performance differs by ownership type, with foreign firms potentially outperforming private firms, although the latter's dummy variable is excluded due to multicollinearity Furthermore, state-owned enterprises may demonstrate greater profitability than private firms, though this finding lacks clarity at a 5% significance level.

Table 4.8: Regression results examining the impact of CSR on ROA

Robust standard errors in parentheses

Table 4.9 presents regression results that indicate Total CSR positively influences return on equity (ROE), with a one-level increase in the CSR Index correlating to a 0.56 percentage point rise in ROE This positive association between CSR and firm performance aligns with findings from earlier studies, including Waddock and Graves (1997) and Cochran and Wood (1984), as well as the comprehensive reviews by Margolis et al (2007) Unlike the results for return on assets (ROA), leverage shows a significant positive relationship with performance Additionally, the ownership structure impacts both ROA and ROE similarly, with foreign and state-owned firms outperforming private firms, as foreign enterprises exceed private firms by 8.51 percentage points in ROE.

Table 4.9: Regression results examining the impact of CSR on ROE.

Robust standard errors in parentheses

The study explores the relationship between different dimensions of Corporate Social Responsibility (CSR) and firm performance, specifically focusing on Labor, Management, and Community CSR's effects on Return on Assets (ROA) and Return on Equity (ROE) using a Fixed Effects Model to control for omitted variable bias The analysis, detailed in Table 4.10, indicates that all three CSR components are likely positively correlated with firm performance; however, Community CSR shows the least impact, with coefficients of 0.26% for ROA and 0.4% for ROE, suggesting that Vietnamese firms may undervalue community-related activities due to their modest contributions Conversely, Management CSR demonstrates the strongest influence on performance compared to Labor and Community CSR Additionally, the study finds that firm size positively correlates with performance, while firm age and leverage may have negative effects.

Table 4.10: Regression results examining the effect of three dimensions of CSR on firm performance based on Fixed Effects Model.

Dependent variables ROA ROE VARIABLES

Robust standard errors in parentheses

Main findings

This study investigates the effects of CSR on firm performance in addition to examining possible determinants of CSR adoption By applying a balanced panel data for

A study of 6,435 Vietnamese firms from 2010 to 2012 reveals a significant positive relationship between corporate social responsibility (CSR) and financial performance, aligning with findings from previous research in both Western countries and Vietnam The analysis indicates that firm size positively correlates with performance, while firm age and leverage negatively affect it Additionally, ownership types play a crucial role, with foreign and state enterprises outperforming private firms The study highlights that all three dimensions of CSR positively influence firm performance, although their contributions vary; specifically, management-based CSR demonstrates the strongest impact, whereas community CSR shows a weaker correlation with performance.

The research highlights that while a majority of Vietnamese enterprises recognize the importance of Corporate Social Responsibility (CSR), their involvement is primarily focused on labor-related activities due to legal compliance requirements In contrast, management and community-based CSR initiatives receive minimal attention, with less than 10% of firms engaging in education, infrastructure, or healthcare services Consequently, the overall Total CSR Index for Vietnamese firms is low, averaging just 5 out of a possible 16 points These findings align with the Baseline Survey Report 2010 by UNIDO Additionally, larger enterprises, those engaged in research and development, and those with a higher ratio of final goods are more likely to participate in CSR activities.

In this case, state-owned and foreign firms may have more CSR activities than private firms in the period from 2010 to 2012.

Policy implications

The integration of Corporate Social Responsibility (CSR) is crucial for Vietnamese firms entering international markets, as it enhances both business competitiveness and societal benefits To encourage greater participation in CSR activities, it is essential to implement supportive actions and policies This study provides recommendations aimed at improving CSR practices in Vietnam, targeting both government initiatives and enterprise engagement.

To enhance Corporate Social Responsibility (CSR) awareness and implementation in businesses, it is essential to strengthen propaganda and adopt supportive policies A solid understanding of business ethics and social responsibilities can drive positive actions among enterprises Collaboration between the government and businesses is crucial for improving CSR practices The government should facilitate CSR knowledge dissemination through seminars and direct dialogues While many Vietnamese firms possess basic CSR knowledge, the focus of propaganda should shift towards the significance and advantages of community-related activities, which are often overlooked These community CSR initiatives reflect the enterprises' responsibilities towards society, particularly in areas such as environmental sustainability.

The government should develop a strategic roadmap to enhance corporate social responsibility (CSR) participation among enterprises, as many may lack the resources to engage in all CSR initiatives effectively This approach will support improvements in education and poverty alleviation, ensuring a more coordinated effort in addressing these critical issues.

1 Increase the awareness of CSR and its benefits within enterprises:

To enhance corporate social responsibility (CSR) awareness, it is essential for company leaders and managers to recognize their influential role in shaping business strategies and performance, particularly within small and medium-sized enterprises (SMEs) Managers must first understand CSR practices to effectively guide their firms in participating in these initiatives By actively engaging in CSR activities that focus on community development, managers can foster mutually beneficial outcomes for both businesses and the communities they serve This study highlights a positive correlation between CSR engagement and firm performance in Vietnam, encouraging enterprises to increase their involvement in CSR to boost profitability.

2 Propose long-term strategies for CSR adoption with appropriate steps in different periods:

Implementing social responsibilities in their true essence is a complex challenge for firms, particularly due to resource limitations, especially financial constraints Larger companies tend to engage more in CSR activities as they can bear the associated costs In contrast, smaller enterprises should develop strategic, step-by-step plans to gradually participate in CSR, enabling them to reap the benefits of such initiatives Additionally, establishing a Code of Conduct for CSR standards is essential to ensure consistent quality in CSR participation across all employees within an organization.

3 Attend more Community-related activities to enhance both CSR practice and firm performance:

Many enterprises often overlook Community CSR, viewing it as having minimal impact on their performance However, increased participation in community-related activities can enhance overall Corporate Social Performance, yielding benefits for both businesses and society at large.

Limitations of the thesis

This study, while grounded in literature review and standard methodology, faces notable limitations, primarily due to the unavailability and inconsistency of data Initially, the analysis was intended to cover a longer time span from 2010 to 2015; however, the TCS and VCS datasets are only accessible for a shorter period.

The study's limited time frame from 2010 to 2012 restricts its ability to assess the long-term effects of Corporate Social Responsibility (CSR) Additionally, inconsistencies in the VES data due to annual changes in survey questionnaires and data entry errors complicate the creation of balanced panel data The regression models also face potential endogeneity issues within the CSR-Performance relationship, which remain unaddressed While literature indicates that employing strong instrument variables could mitigate this problem, the dataset's limitations hinder the identification of such variables, leading to biased estimates Furthermore, the analysis neglects industry-level and macro-level factors in Vietnam that could influence firm performance, leaving the study unable to fully explain the impact of external influences beyond the firms' characteristics.

Future research

This study explores the relationship between Corporate Social Responsibility (CSR) and firm performance over a three-year period from 2010 to 2012, suggesting that future research should extend the timeframe to capture the long-term effects of CSR on performance It highlights the limitation of using only accounting indicators like ROA and ROE, recommending the inclusion of both accounting and market indicators for a more comprehensive assessment of firm performance Additionally, it calls for addressing endogeneity issues in CSR research by utilizing robust instrumental variables or developing more complex models that incorporate moderating factors, which could help reduce estimation bias and improve analytical outcomes.

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Regression results for Fixed Effect Model

Appendix 1: Regression results for Fixed Effect Model

 For determinants of CSR adoption

xtreg Total_CSR firm_size firm_age rd_engage export leverage final_goods state_firm foreign_firm joint_stock_firm, fe

Fixed-effects (within) regression robust

Group variable: firm_id Number of groups = 6435

R-sq: within = 0.0164 Obs per group: min = 3 between = 0.2238 avg = 3.0 overall = 0.1757 max = 3

(Std Err adjusted for 6435 clusters in firm_id) -

 For impacts of Total CSR on ROA

xtreg roa Total_CSR firm_size firm_age rd_engage export leverage state_firm foreign_firm joint_stock_firm, fe robust

Fixed-effects (within) regression Number of obs = 19305

Group variable: firm_id Number of groups = 6435

Robust Std Err t P>|t| [95% Conf Interval] -+ - firm_size | 1940129 0395101 4.91 0.000 1165601 2714658 firm_age | 0580062 0744857 0.78 0.436 -.0880105 2040229 rd_engage | 4000887 0690285 5.80 0.000 2647699 5354075 export | 0514568 0446691 1.15 0.249 -.0361096 1390232 leverage | 1165436 0622692 1.87 0.061 -.0055248 238612 final_goods | 3297676 0462962 7.12 0.000 2390116 4205236 state_firm | 1.68482 3717867 4.53 0.000 9559948 2.413646 foreign_firm | 1.235212 3398031 3.64 0.000 5690846 1.901339 joint_stock_firm | 8559368 2669593 3.21 0.001 3326078 1.379266

_cons | 3.419624 2601821 13.14 0.000 2.909581 3.929667 sigma_u | 1.7961728 sigma_e | 1.3497765 rho | 63909501 (fraction of variance due to u_i)

85 corr(u_i, Xb) = -0.2366 Prob > F = 0.0000 (Std Err adjusted for 6435 clusters in firm_id)

 For impacts of Total CSR on ROE

xtreg roe Total_CSR firm_size firm_age rd_engage export leverage state_firm foreign_firm joint_stock_firm, fe robust

Fixed-effects (within) regression Number of obs = 19305

Group variable: firm_id Number of groups = 6435

R- sq: within = 0.0338 Obs per group: min = 3 between = 0.0588 avg = 3.0 overall = 0.0418 max = 3

(Std Err adjusted for 6435 clusters in firm_id) - sigma_u | 07198004

| Robust roa | Coef Std Err t P>|t| [95% Conf Interval] -+ -

Total_CSR | 0026628 0002812 9.47 0.000 0021117 003214 firm_size | 0051936 0010746 4.83 0.000 003087 0073002 firm_age | -.0154548 0021297 -7.26 0.000 -.0196298 -.0112799 rd_engage | 0006695 0017076 0.39 0.695 -.0026779 004017 export | -.0023063 0013649 -1.69 0.091 -.004982 0003694 leverage | -.0059022 0024329 -2.43 0.015 -.0106715 -.0011329 state_firm | 021362 0105934 2.02 0.044 0005953 0421287 foreign_firm | 0312456 0118248 2.64 0.008 0080651 0544262 joint_stock_firm | 0074732 0060964 1.23 0.220 -.0044779 0194243

_cons | 0088551 0074446 1.19 0.234 -.0057389 0234491 sigma_u | 04254375 sigma_e | 04068442 rho | 52232891 (fraction of variance due to u_i)

Robust Std Err t P>|t| [95% Conf Interval] -+ -

Total_CSR | 0056017 0004766 11.75 0.000 0046674 006536 firm_size | 008346 0018367 4.54 0.000 0047455 0119465 firm_age | -.0244866 003635 -6.74 0.000 -.0316123 -.0173608 rd_engage | 0031956 0031153 1.03 0.305 -.0029114 0093025 export | -.0037126 0024547 -1.51 0.130 -.0085247 0010995 leverage | 0419387 0043096 9.73 0.000 0334905 0503869 state_firm | 0568039 0183425 3.10 0.002 0208465 0927613 foreign_firm | 085078 0215589 3.95 0.000 0428154 1273405 joint_stock_firm | 017825 0091798 1.94 0.052 -.0001704 0358204

_cons | -.0195257 012856 -1.52 0.129 -.0447277 0056764 -+ - sigma_e | 07260897 rho | 49565036 (fraction of variance due to u_i) -

 For individual impacts of three CSR dimensions on ROA

xtreg roa Labor_CSR firm_size firm_age rd_engage export leverage state_firm foreign_firm joint_stock_firm, fe robust

Fixed-effects (within) regression Number of obs = 19305

Group variable: firm_id Number of groups = 6435

R-sq: within = 0.0129 Obs per group: min = 3 between = 0.0490 avg = 3.0 overall = 0.0337 max = 3

(Std Err adjusted for 6435 clusters in firm_id)

xtreg roa Management_CSR firm_size firm_age rd_engage export leverage state_firm foreign_firm joint_stock_firm, fe

Fixed-effects (within) regression robust

Group variable: firm_id Number of groups = 6435

R-sq: within = 0.0147 Obs per group: min = 3 between = 0.0488 avg = 3.0 overall = 0.0342 max = 3

(Std Err adjusted for 6435 clusters in firm_id) -

| Robust roa | Coef Std Err t P>|t| [95% Conf Interval] -+ -

Labor_CSR | 0032175 0005485 5.87 0.000 0021422 0042928 firm_size | 00542 0010761 5.04 0.000 0033105 0075295 firm_age | -.0151401 0021339 -7.09 0.000 -.0193233 -.0109569 rd_engage | 0015642 0017121 0.91 0.361 -.0017921 0049205 export | -.0023151 0013675 -1.69 0.091 -.0049959 0003657 leverage | -.0056561 0024356 -2.32 0.020 -.0104308 -.0008814 state_firm | 025189 0108205 2.33 0.020 0039773 0464007 foreign_firm | 0338719 0120351 2.81 0.005 0102792 0574646 joint_stock_firm | 0094137 0061193 1.54 0.124 -.0025823 0214096

_cons | 0100104 0074776 1.34 0.181 -.0046482 024669 sigma_u | 04305051 sigma_e | 04080081 rho | 52681033 (fraction of variance due to u_i)

Robust Std Err t P>|t| [95% Conf Interval] -+ - Management_CSR | 0040611 0006097 6.66 0.000 0028658 0052563 firm_size | 005556 0010782 5.15 0.000 0034423 0076696 firm_age | -.0153812 00213 -7.22 0.000 -.0195566 -.0112057 rd_engage | 0011398 0017192 0.66 0.507 -.0022304 00451 export | -.0021513 0013673 -1.57 0.116 -.0048316 0005291 leverage | -.005769 0024358 -2.37 0.018 -.010544 -.000994 state_firm | 0251469 0109428 2.30 0.022 0036954 0465984 foreign_firm | 0335058 0120592 2.78 0.005 0098659 0571458 joint_stock_firm | 0093436 0062475 1.50 0.135 -.0029035 0215908

xtreg roa Community_CSR firm_size firm_age rd_engage export leverage state_firm foreign_firm joint_stock_firm, fe robust

Fixed-effects (within) regression Number of obs = 19305

Group variable: firm_id Number of groups = 6435

R- sq: within = 0.0142 Obs per group: min = 3 between = 0.0456 avg = 3.0 overall = 0.0321 max = 3

(Std Err adjusted for 6435 clusters in firm_id) -

 For individual impacts of three CSR dimensions on ROE sigma_u | 04283075 sigma_e | 04076332 rho | 52471661 (fraction of variance due to u_i)

Robust Std Err t P>|t| [95% Conf Interval] -+ - Community_CSR | 0026074 0004515 5.77 0.000 0017223 0034926 firm_size | 0055224 0010762 5.13 0.000 0034127 0076321 firm_age | -.015555 0021349 -7.29 0.000 -.0197401 -.0113699 rd_engage | 001241 0017057 0.73 0.467 -.0021027 0045847 export | -.0021981 0013652 -1.61 0.107 -.0048744 0004782 leverage | -.0057385 0024357 -2.36 0.019 -.0105134 -.0009637 state_firm | 0225029 0105385 2.14 0.033 0018439 0431618 foreign_firm | 0326502 0118494 2.76 0.006 0094214 055879 joint_stock_firm | 0081321 0060454 1.35 0.179 -.003719 0199832

_cons | 0183549 0073312 2.50 0.012 0039833 0327265 sigma_u | 04266077 sigma_e | 0407742 rho | 52259972 (fraction of variance due to u_i)

xtreg roe Labor_CSR firm_size firm_age rd_engage export leverage state_firm foreign_firm joint_stock_firm, fe robust

Fixed-effects (within) regression Number of obs = 19305

Group variable: firm_id Number of groups = 6435

R-sq: within = 0.0266 Obs per group: min = 3 between = 0.0503 avg = 3.0 overall = 0.0344 max = 3

(Std Err adjusted for 6435 clusters in firm_id)

xtreg roe Management_CSR firm_size firm_age rd_engage export leverage state_firm foreign_firm joint_stock_firm, fe robust

Fixed-effects (within) regression Number of obs = 19305

Group variable: firm_id Number of groups = 6435

(Std Err adjusted for 6435 clusters in firm_id) -

-+ - Management_CSR | 0112829 001071 10.53 0.000 0091833 0133825 firm_size | 0090117 0018333 4.92 0.000 0054178 0126056 firm_age | -.0243745 0036313 -6.71 0.000 -.031493 -.017256

Robust Std Err t P>|t| [95% Conf Interval] -+ -

Labor_CSR | 0072395 0010259 7.06 0.000 0052283 0092507 firm_size | 0087814 0018365 4.78 0.000 0051812 0123816 firm_age | -.0237985 0036441 -6.53 0.000 -.0309422 -.0166548 rd_engage | 0050498 0031128 1.62 0.105 -.0010522 0111518 export | -.0037524 0024686 -1.52 0.129 -.0085916 0010869 leverage | 0424479 0043299 9.80 0.000 0339597 050936 state_firm | 0647519 0183036 3.54 0.000 0288708 100633 foreign_firm | 0904919 0215817 4.19 0.000 0481847 1327991 joint_stock_firm | 0218501 0091565 2.39 0.017 0039003 0397999

_cons | -.0183041 0130285 -1.40 0.160 -.0438442 007236 sigma_u | 07368749 sigma_e | 07288211 rho | 50549467 (fraction of variance due to u_i)

| Robust roe | Coef Std Err t P>|t| [95% Conf Interval] rd_engage | 0037702 0031079 1.21 0.225 -.0023224 0098628 export | -.0033737 0024519 -1.38 0.169 -.0081802 0014328 leverage | 0421034 0043092 9.77 0.000 0336559 0505508 state_firm | 0642641 018162 3.54 0.000 0286606 0998675 foreign_firm | 0890752 0213142 4.18 0.000 0472923 1308581 joint_stock_firm | 0214499 0092411 2.32 0.020 0033342 0395655

xtreg roe Community_CSR firm_size firm_age rd_engage export leverage state_firm foreign_firm joint_stock_firm, fe robust

Fixed-effects (within) regression Number of obs = 19305

Group variable: firm_id Number of groups = 6435

R- sq: within = 0.0257 Obs per group: min = 3 between = 0.0441 avg = 3.0 overall = 0.0310 max = 3

(Std Err adjusted for 6435 clusters in firm_id) -

- sigma_u | 07272692 sigma_e | 07265612 rho | 50048701 (fraction of variance due to u_i)

Robust Std Err t P>|t| [95% Conf Interval] -+ - Community_CSR | 0039882 0007119 5.60 0.000 0025927 0053838 firm_size | 0091392 0018403 4.97 0.000 0055315 0127468 firm_age | -.024561 0036496 -6.73 0.000 -.0317155 -.0174066 rd_engage | 0046925 0031129 1.51 0.132 -.0014097 0107948 export | -.0034689 0024694 -1.40 0.160 -.0083097 0013718 leverage | 0423638 0043337 9.78 0.000 0338683 0508593 state_firm | 061149 018376 3.33 0.001 0251259 0971722 foreign_firm | 0891685 0216749 4.11 0.000 0466784 1316586 joint_stock_firm | 0201704 0092033 2.19 0.028 0021289 0382118

_cons | 0004096 0128015 0.03 0.974 -.0246856 0255047 sigma_u | 07229613 sigma_e | 07291261 rho | 49575461 (fraction of variance due to u_i)

Hausman test results

 For determinants of CSR adoption

-+ - firm_size | 1940129 5204416 -.3264286 0330977 firm_age | 0580062 2213135 -.1633073 0569277 rd_engage | 4000887 7531173 -.3530285 0260317 export | 0514568 1849854 -.1335286 0228246 leverage | 1165436 2303845 -.1138409 035003 final_goods | 3297676 283928 0458396 0215377 state_firm | 1.68482 1.438134 2466863 185523 foreign_firm | 1.235212 3005854 9346263 2435968 joint_stoc~m | 8559368 914888 -.0589512 1655616

- b = consistent under Ho and Ha; obtained from xtreg

B = inconsistent under Ha, efficient under Ho; obtained from xtreg Test: Ho: difference in coefficients not systematic chi2(9) = (b-B)'[(V_b-V_B)^(-1)](b-B)

 For the impact of CSR on ROA

Coefficients b = consistent under Ho and Ha; obtained from xtreg

B = inconsistent under Ha, efficient under Ho; obtained from xtreg Test: Ho: difference in coefficients not systematic

-+ - Total_CSR | 0026628 0025474 0001154 0001769 firm_size | 0051936 0062203 -.0010267 0010277 firm_age | -.0154548 0008625 -.0163173 0018003 rd_engage | 0006695 0011191 -.0004495 0009234 export | -.0023063 -.0021723 -.000134 0008002 leverage | -.0059022 -.0156049 0097027 0012278 state_firm | 021362 026826 -.005464 0059299 foreign_firm | 0312456 007335 0239106 0074197 joint_stoc~m | 0074732 0041667 0033065 0050885

 For the impact of CSR on ROE

-+ - Total_CSR | 0056017 0054333 0001684 0003352 firm_size | 008346 0084887 -.0001427 0018582 firm_age | -.0244866 00222 -.0267066 0032709 rd_engage | 0031956 0045982 -.0014026 0017737 export | -.0037126 -.0026004 -.0011122 0015231 leverage | 0419387 0253898 0165489 0023324 state_firm | 0568039 0431877 0136163 0108416 foreign_firm | 085078 0133471 0717308 0132873 joint_stoc~m | 017825 0092748 0085502 0091439

- b = consistent under Ho and Ha; obtained from xtreg

B = inconsistent under Ha, efficient under Ho; obtained from xtreg Test: Ho: difference in coefficients not systematic chi2(9) = (b-B)'[(V_b-V_B)^(-1)](b-B)

Awareness of CSR questionnaires on the Baseline Survey Report 2010

In order to ascertain their awareness of CSR, the respondents were administered a list of statements which they had to rate on a 4 point scale of importance:

The 20 statements covered the seven subjects of social responsibility as emphasized in the ISO Guidance on social responsibility:

Statement 1: The company consults employees on important issues.

Statement 2: The company ensures effective feedback (in the form of improving products, services, business relationships ) through regular dialogue/consultation with customers, suppliers and other people you do business with.

Statement 3: The company ensures adequate steps are taken against all forms of discrimination both in the workplace and at the time of recruitment.

Statement 4: The company monitors compliance with labor laws and fair working conditions for employees and home workers.

Statement 5: The company upholds health and safety policy and record formally work-related incidents, injuries and illnesses on an annual basis.

Statement 6: The company encourages employees to develop real skills and long-term careers.

Statement 7: The company monitors information on existing environmental laws.

Statement 8: The company saves money by reducing the environmental impact by energy consumption.

Statement 9: The company saves money by reducing the environmental impact by waste minimization and recycling.

Statement 10: The company saves money by reducing the environmental impact by pollution prevention.

Statement 11: The company gains an advantage over competitors by using the sustainability of your products and services.

Statement 12: The company adheres to an environmental management certification (for example ISO14000) in order to better compete in the global market place and increase your organization's competitive advantage.

Statement 13: The company's values and roles of conduct are clearly defined.

Statement 14: The company registers and resolves complaints for customers, suppliers and business partners.

Statement 15: The company upholds a fair purchasing policy, provisioning for consumer protection and timely payment of suppliers' invoices.

The company prioritizes customer wellbeing by implementing a quality control system that assesses the health and safety impacts of its products, including the identification of restricted substances.

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