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

Problem statement

In recent decades, the social impact of enterprises has gained importance in economics and management, as highlighted by Fiori et al (2007) While the primary goal of a business is to maximize profits and enhance financial performance, its outcomes are influenced by the company's strategic decisions This raises a critical question among researchers: what level of social and environmental responsibility can a firm adopt while still meeting its financial objectives? The concept of Corporate Social Responsibility (CSR) has emerged as a framework to address both social and environmental challenges effectively (Uadiale & Fagbemi).

Corporate Social Responsibility (CSR) encompasses the efforts of businesses to address social concerns and meet societal expectations (Gossling & Vocht, 2007) Historically, CSR was often dismissed by investors and scholars until the late 1970s (Lydenberg, 2005) However, since the 1990s, CSR has gained significant acceptance and support from governments, businesses, and individuals alike.

Corporate Social Responsibility (CSR) has become a vital concept in management, economics, and firm theory, emphasizing the social and environmental impacts of business operations Defined by Carroll as the obligation of firms to operate profitably, legally, and ethically, CSR reflects a shift from traditional competitive strategies, such as product diversification and quality enhancement, to a focus on enhancing corporate image and social accountability.

Adopting Corporate Social Responsibility (CSR) activities is crucial for enhancing a company's reputation and brand development Customers increasingly prefer businesses that contribute positively to society and the community Thus, a deeper understanding of the link between CSR and a firm's performance can empower managers, shareholders, 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 others suggest negative or neutral outcomes (Wright & Ferris, 1997; McWilliams & Siegel, 2000) This disparity fuels scholarly interest in uncovering the true dynamics between CSR and performance Notably, most empirical research on CSR has focused on developed nations, particularly the US and European countries, where CSR practices are well-established (Belal, 2001; Gray et al., 1995) In contrast, studies on CSR in developing countries remain limited (Hopper & Hoque, 2004), highlighting a critical gap that motivates researchers to investigate CSR-performance relationships in ASEAN countries.

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

The concept of Corporate Social Responsibility (CSR) was initially 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 a World Bank program aimed at enhancing government engagement with CSR practices (Twose and Rao, 2003) The country's accession to the WTO in 2007 marked a significant step toward globalization and the adoption of CSR in Vietnam In this context, the Vietnamese government and local enterprises play crucial roles in advancing CSR practices, with the government responsible for creating and enforcing policies, while enterprises focus on implementing CSR initiatives.

The Vietnamese government has implemented new laws and regulations to enhance Corporate Social Responsibility (CSR) practices, including the Environment Protection Law and updated labor codes to support employees (Ho & Yekini, 2014) In 2004, a Strategic Orientation for Sustainable Development was introduced, focusing on 19 strategic areas across economic, social, and environmental criteria This initiative aims to elevate the government's role in CSR activities and serves as a foundation for the "Green Growth" strategies planned for 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, leading to negative societal impacts, such as environmental degradation A notable example is Vedan, a Taiwanese food manufacturer, which faced legal consequences in 2008 for illegally discharging waste into the Thi Vai River over a 14-year period To avoid such harmful practices, firms must recognize their social responsibilities, which can ultimately benefit their operations The United Nations Industrial Development Organization (UNIDO) has been instrumental in promoting CSR among Vietnamese firms through its project aimed at helping small and medium-sized enterprises (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 Vietnam Chamber of Commerce and Industry (VCCI), this initiative seeks to enhance CSR awareness and standards among Vietnamese SMEs, thereby boosting their competitiveness in international markets.

In Vietnam, large enterprises are increasingly engaging in Corporate Social Responsibility (CSR) activities due to globalization pressures, yet over 90% of firms are small and medium-sized and often overlook CSR as a priority This highlights the ambiguity surrounding the benefits of CSR adoption in the country Furthermore, research on CSR in Vietnam remains limited, emphasizing the need for empirical studies to explore its impact on firm performance This study aims to analyze firm-level data and conduct quantitative analysis to identify the determinants of CSR adoption and assess whether CSR engagement enhances financial performance for Vietnamese firms.

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 firm performance in Vietnam, utilizing data 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 the lens of financial metrics, intentionally excluding other performance dimensions such as economic and social performance Consequently, the term "performance" in this study specifically refers to a company's financial performance as measured by various financial indicators.

Research methodology

This study conducts a quantitative analysis of panel data from Vietnamese firms, sourced from the Vietnam Technology and Competitiveness Survey (TCS) The research aims to assess variations in firm performance associated with Corporate Social Responsibility (CSR) over a three-year period Utilizing both the Fixed Effect Model (FEM) and Random Effect Model (REM), the study examines the relationship between CSR and firm performance Following the regression analysis, the Hausman test will be applied to determine 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 This section defines essential concepts, outlines key theories related to CSR, and summarizes significant empirical findings from leading studies on the CSR-performance relationship These insights will serve as the foundation for the conceptual framework employed in this research.

 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 connection to firm performance It begins by defining and measuring both CSR and financial performance Additionally, it presents various theories and empirical studies that illustrate the relationship between CSR and performance, providing a comprehensive overview of CSR literature in practice.

Corporate Social Responsibility

Definitions

Despite extensive research over the past few decades, a clear and universally accepted definition of Corporate Social Responsibility (CSR) remains elusive (Wood, 2010) Various factors contribute to this ambiguity, including differing perspectives on CSR that cater to specific interests, which complicates the establishment of a cohesive concept (Van Marrewijk, 2003) Furthermore, the visualization of CSR is challenged by the ongoing debates surrounding its related concepts, such as Corporate Social Performance (CSP) and Corporate Social Responsiveness (Wood, 2010).

The ambiguity surrounding the definition of Corporate Social Responsibility (CSR) has led to varied interpretations, making empirical research on the topic increasingly challenging (Lozano, 2008; Orlitzky, Siegel, & Waldman, 2011).

Corporate Social Responsibility (CSR) can be broadly defined as the obligation of enterprises to meet societal expectations in their management strategies (Gossling & Vocht, 2007) This perspective is shared by both large organizations and scholars alike According to the World Bank, fulfilling these social responsibilities is essential for sustainable business practices.

Corporate social responsibility (CSR) refers to a company's dedication to fostering sustainable economic growth by collaborating with employees, their families, and the broader community to enhance their quality of life This approach not only benefits the individuals involved but also aligns with the company's business objectives and promotes overall development.

Achieving commercial success while honoring ethical values and respecting people, communities, and the environment is crucial According to the Commission of the European Communities (2001), Corporate Social Responsibility (CSR) involves companies voluntarily integrating social and environmental concerns into their business operations and interactions with stakeholders.

Corporate Social Responsibility (CSR) is defined by McWilliams and Siegel (2001) as actions that promote social good beyond legal obligations, while Frooman (1997) highlights that CSR involves voluntary actions by firms that significantly impact social stakeholders' welfare These definitions indicate that CSR initiatives extend beyond legal requirements to address societal and stakeholder interests Carroll (1979) further refines CSR into four categories: economic, legal, ethical, and discretionary expectations, providing a comprehensive framework for understanding a firm's social responsibilities This conceptualization clarifies the distinction between profit-making efforts and the social responsibilities of management, as noted by Lozano (2008) and Wood (2010).

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

Measurement of CSR

Measuring a firm's social performance presents numerous challenges due to the varying definitions of Corporate Social Responsibility (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 (KLD) in the US and Vigeo in Europe The KLD index, in particular, has been extensively utilized to assess the CSR levels of US firms, derived from a comprehensive database that includes surveys, financial statements, government reports, and academic research to evaluate multiple dimensions of Corporate Social Performance (CSP) Numerous studies have employed the KLD Index as a key metric for measuring CSR (Waddock & Graves, 1997; McWilliams & Siegel, 2000; Garcia-Castro et al., 2010).

In countries outside the US where KLD data is unavailable, researchers frequently utilize secondary data from various surveys to assess Corporate Social Responsibility (CSR) performance Ghauri and Gronhaug (2005) highlight that “secondary data is useful not only to find the information to solve our research problem, but also better understand and explain our research problem.” Unlike extra-financial ratings, secondary data offers a complementary perspective on Corporate Social Performance (CSP) by reflecting a firm's actual activities rather than evaluations from external agencies Consequently, the CSR Index, derived from secondary data, emerges as the most widely used measure for CSR.

Firm Performance

Definitions

In contemporary business and management strategies, firm performance is recognized as a crucial concept that organizations must enhance to thrive and meet the expectations of key stakeholders Despite extensive literature discussing firm performance as a primary dependent variable, a universally accepted definition of performance remains elusive.

The lack of consensus on measuring firm performance can result in varied outcomes in performance-related studies Glick, Washburn, and Miller (2005) indicate that researchers often rely on limited indicators to represent firm performance due to the absence of critical variables in available datasets.

Firm performance is a complex, multi-dimensional construct that can be categorized into three key aspects: financial performance, business performance, and organizational effectiveness (Venkatraman & Ramanujam, 1987) Financial performance is typically assessed using various accounting-based indicators, such as return on assets (ROA), return on equity (ROE), and return on sales (ROS), which reflect the firm's profitability and financial health Business performance, a crucial focus in management studies, encompasses market-based measures that integrate both financial and operational metrics, with indicators like sales growth, market share, and product development Lastly, organizational effectiveness represents another vital dimension of firm performance, highlighting the overall efficiency and impact of a company's operations.

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 production efficiency, calculated as the ratio of useful output to the physical inputs used According to Lieberman and Kang (2008), productivity can be assessed through single-, multi-, 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 can lead to misleading analyses.

Firm profitability is assessed using accounting indicators like ROA and ROE, which provide a broad view of a company's financial condition but 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 Given that this study focuses on the effects of CSR on financial performance, utilizing overall financial indicators is essential for accurately capturing firm performance Thus, profitability measurement is deemed appropriate and is incorporated into the study's methodology.

Corporate Social Responsibility and Firm Performance

Theoretical review

Numerous well-established theories have explored the connection between Corporate Social Responsibility (CSR) investment and a firm's financial performance This section provides an overview of key theories in prior CSR research, ranging from fundamental concepts to more complex frameworks.

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

Corporate Social Responsibility (CSR) has evolved in response to criticisms of traditional profit-maximization theories, particularly the Theory of The Firm, which posits that a firm's primary goal is to maximize profits Early proponents like Friedman (1962, 1970) argued that companies should focus solely on increasing shareholder wealth without any obligation to social responsibilities However, this perspective has faced significant backlash from scholars and stakeholders, leading to the development of alternative frameworks such as Agency Theory, Stakeholder Theory, and the Pyramid Model of CSR, which advocate for a broader consideration of the interests of all stakeholders.

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

The agency perspective highlights a persistent 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, potentially leading to corporate social responsibility (CSR) initiatives that detract from firm performance (Krisnawati et al., 2014) Managers may prioritize their own wealth over investing in projects that could enhance the company’s financial success, resulting in diminished shareholder value Therefore, CSR resources should be allocated efficiently to boost firm performance rather than to enrich managers inappropriately To address the agency problem, theories such as Stakeholder Theory and Stewardship Theory have emerged.

Stakeholder Theory suggests that corporate social responsibility (CSR) positively influences a firm's performance, challenging earlier theories that highlighted a negative relationship Notably, Freeman's stakeholder perspective emphasizes the importance of considering the interests of all stakeholders, reinforcing the idea that CSR can enhance overall business success.

In "1984," it is proposed that a firm's survival hinges on its ability to satisfy stakeholders who significantly impact its welfare, including customers, employees, and suppliers This stakeholder theory, widely accepted and developed further by researchers, emphasizes the importance of mutual benefit; Blombọck and Wigren (2009) advocate for collaboration between firms and stakeholders, highlighting the necessity of corporate social responsibility (CSR) activities to support non-financial stakeholders Clarkson (1995) reinforces this by asserting that creating wealth for stakeholders is essential for a firm's prosperity Jensen (2002) introduced the concept of value maximization, aligning stakeholder theory with long-term firm value, suggesting that maximizing market value is a primary objective while satisfying stakeholder interests Jensen's approach illustrates that firm value maximization can coexist with stakeholder satisfaction, moving away from traditional conflicting objectives.

Instrumental Stakeholder Theory, rooted in Freeman's 1984 framework, serves as a foundational paradigm for subsequent theories (Margolis & Walsh, 2003) Donaldson and Preston's influential study (1995) classifies Stakeholder Theory into three categories: descriptive, normative, and instrumental Among the various iterations of Stakeholder Theory, Instrumental Stakeholder Theory has garnered significant attention from researchers (McWilliams and Siegel, 2001; Surroca et al., 2010).

Instrumental Stakeholder Theory posits that social activities are utilized as tools to enhance profits and boost shareholder wealth In essence, Corporate Social Responsibility (CSR) initiatives are designed to benefit a firm's stakeholders while ultimately maximizing profits for shareholders This study primarily emphasizes the economic advantages that arise when companies engage in activities that support diverse stakeholder groups.

The resource-based view of the firm (RBV) explains the level of corporate social responsibility (CSR) engagement by highlighting that firms possess various resources—assets, attributes, and knowledge—that can be leveraged to achieve sustainable competitive advantage Initially developed by Wernerfelt in 1984 and influenced by Penrose's earlier work, Barney expanded this theory in 1991 by identifying four key criteria for sustainable competitive advantage: valuable, rare, inimitable, and non-substitutable According to this perspective, CSR initiatives can enhance competitive advantage and improve overall firm performance Hart's 1995 framework further posits that environmental social responsibility serves as a resource for attaining sustainable competitive advantage Additionally, Russo and Fouts (1997) demonstrated that firms with high environmental performance tend to achieve better financial outcomes, reinforcing the connection between CSR and competitive success.

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

In 1997, Waddock and Graves proposed that companies with superior financial performance possess the resources necessary to effectively tackle social issues, highlighting a reciprocal relationship between corporate social responsibility (CSR) and firm performance Firms that excel financially can invest more in strategic initiatives addressing environmental concerns and fostering strong employee and community relations Consequently, embracing CSR not only enhances a company's public image but also leads to improved customer relationships and more appealing recruitment opportunities, ultimately yielding long-term benefits for the organization.

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

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

Stewardship theory, introduced by Donaldson and Davis in 1991, addresses the agency problem by positing 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) Muth and Donaldson (1998) further developed this theory, suggesting that managers, as stewards, must balance the interests of stakeholders with the firm's performance objectives Achieving alignment between stakeholder interests and managerial goals creates an equilibrium that serves as the ideal outcome for both parties.

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 Corporate Social Responsibility (CSR), developed by Carroll in 1991 based on Shareholder Theory, posits that a firm's primary goal is profit maximization, but this is not its sole responsibility The model outlines four layers of responsibility: economic, legal, ethical, and philanthropic The economic layer, positioned at the base, is paramount, aligning with Friedman’s Shareholder Theory, as a firm must first generate profits for shareholders before addressing higher layers The legal layer mandates compliance with governmental laws and regulations, while the ethical layer emphasizes the firm's duty to engage in positive actions for stakeholders At the apex, the philanthropic layer reflects a firm's contributions to society Carroll argues that adhering to all four responsibilities is essential for achieving profits and overall success, establishing a foundation for more complex CSR models that build upon his framework.

Figure 2.1: The Pyramid Model of CSR

Recent theories indicate that Corporate Social Responsibility (CSR) has a positive impact on a firm's performance, particularly over the long term Theoretical literature confirms 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

In a comprehensive review of 109 empirical studies conducted between 1972 and 2002, the relationship between Corporate Social Responsibility (CSR) and firm performance was examined The findings revealed that 54 studies indicated a positive correlation, while 28 studies reported insignificant relationships Only 7 studies suggested a negative impact, and the remaining 20 studies presented mixed results.

A comprehensive analysis conducted in 2007 examined 167 papers over a 35-year period, revealing a positive but relatively small impact of corporate social responsibility (CSR) on firm performance The authors emphasize the need for future theoretical and empirical studies to enhance understanding of why firms adopt CSR, the strategies they implement, and the mechanisms that connect CSR to performance outcomes (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 inconclusive, with some studies indicating a negative or no correlation (Bromiley & Markus, 1989; Barla, 2007) Conflicting results can be attributed to factors such as the lack of reliable measurements of social performance and the omission of critical moderating variables (Reverte et al., 2015; Surroca et al., 2010; García-Castro et al., 2010) McWilliams and Siegel (2000) highlight that neglecting innovation-related variables can lead to model misspecifications and unreliable findings Additionally, many studies explore the mediating role of innovation in the relationship between social performance and firm performance (Lockett et al., 2006) Furthermore, 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.

The motives behind a firm's adoption of Corporate Social Responsibility (CSR) can significantly influence its performance outcomes According to Bénabou and Tirole (2010), firms engage in CSR for three primary reasons: altruism, strategic policy, and greenwashing While altruistic motives may lead to decreased performance as firms focus on benefiting others, strategic motives aim to enhance profits and can positively impact performance Conversely, greenwashing allows firms to project an environmentally friendly image without substantial operational changes, potentially improving performance in certain aspects, as noted by Frankental (2001) Thus, the underlying motives for CSR engagement can result in varying financial performance outcomes for firms.

Previous empirical research on the effects of Corporate Social Responsibility (CSR) on performance can be divided into two primary categories The first category focuses on the short-term financial impacts of CSR engagement, utilizing event study methodologies However, findings in this area are inconsistent; for example, Wright and Ferris (1997) identified a negative relationship, while Posnikoff (1997) found a positive one As a result, no definitive conclusion has been reached regarding the effects of CSR on short-run performance or abnormal returns (McWilliams & Siegel).

Research on the long-term effects of Corporate Social Responsibility (CSR) on financial performance often relies on quantitative methods and various accounting indicators Studies, such as those conducted by Cochran and Wood (1984), utilize multiple accounting metrics to assess a firm's financial outcomes, yielding a range of results.

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 It highlights the importance of including asset age as a control variable to address potential spurious relationships, revealing that while the addition of this variable supports a positive correlation between Corporate Social Responsibility (CSR) and firm performance, the effect is notably diminished Utilizing firm-level data from the S&P 500, Waddock and Graves (1997) develop a weighted CSP Index, which serves as the primary explanatory variable in regression analyses that incorporate ROA, ROE, and ROS as dependent variables, alongside control variables such as size, risk, and industry The findings indicate a positive impact of the CSP Index on financial performance, reinforcing the significance of CSR initiatives.

A study by Lin et al (2009) examined 1,000 Taiwanese firms committed to CSR and R&D from 2002 to 2004, revealing that while CSR initially appears to enhance financial performance, it only shows positive effects on long-term performance when considering five financial indicators In contrast, short-term financial performance does not benefit from CSR adoption Similarly, Aupperle et al (1985) utilized a forced-choice instrument survey to analyze CSR's impact on risk-adjusted returns on assets (ROA) over one-year and five-year periods, concluding that CSR measures, represented by an overall firm-level CSR Index, show no 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 attempt to directly correlate CSR with performance metrics like Tobin’s Q and return on equity However, this approach often omits critical interacting factors, leading to inconsistent and unreliable results (Wood, 2010) Model misspecification and endogeneity can bias regression coefficients, particularly when unobserved firm characteristics correlate with both CSR and performance Furthermore, the causal relationship remains debated: does CSR engagement enhance performance, or do better-performing firms have the resources to invest in CSR (Fodio et al., 2013)? Many companies may engage in CSR due to their strong performance or anticipated profitability Despite the ongoing debate, a majority of empirical studies and theoretical arguments support a positive relationship between CSR and firm performance The following chapter will detail the data collection and empirical models used to explore the CSR-performance nexus in Vietnam.

This chapter outlines the research methodology of the thesis, beginning with the data collection procedures and essential information about the studied data It then introduces the conceptual framework, defines the main variables, and presents the empirical models designed to address the research questions Finally, 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), collects comprehensive firm-level data from nearly all Vietnamese firms and agencies Since its inaugural publication in 2000, the VES has included a diverse range of enterprises, encompassing foreign, state, and non-state firms across all 63 provinces and cities in Vietnam The survey's quality and the number of questions have improved each year, making it a reliable resource for analyzing 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) covering the years 2010 to 2012, while employing VES data from 2011 to 2013 Consequently, the characteristics of the firms analyzed pertain to the years 2010-2012 The firm-level information will be integrated with Corporate Social Responsibility data to create a comprehensive panel dataset spanning the same 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 innovation and technology, having been published annually since 2010 through collaboration between the Central Institute for Economic Management, the General Statistics Office, the Development Economics Research Group, and the University of Copenhagen Unlike the more general Vietnam Enterprise Survey, TCS specifically addresses technology, innovation, and Corporate Social Responsibility (CSR), making it a valuable supplement to the VES data, as all TCS participants are drawn from the VES dataset This research leverages CSR-related questions from the TCS, formatted as YES/NO inquiries to create dummy variables for calculating the CSR Index, which will serve as the primary explanatory variable in the regression models of this 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 firms in TCS are typically viewed as a subset of VES data, leading to the merging of TCS and VES to derive common observations for each year The combined results show totals of 7707, 8636, and 7931 for the years 2010, 2011, and 2012, respectively Subsequently, the annual data is consolidated 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 by size and ownership structures to analyze 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 measure CSR engagement, quantified by the number of CSR activities undertaken by each firm The overall CSR Index reflects the total number of CSR activities per firm within each aspect.

The individual CSR Index is derived from various CSR indicators within the survey, culminating in an overall CSR Index for each firm that reflects the aggregated scores of three key sub-components: labor, management, and community In the context of TCS, the Total CSR Index can vary from 0 to 16, with Table 3.3 providing a comprehensive summary of the indicators that make up the indexes for these three CSR components in the TCS survey.

Labor or compliance indicators represent essential legal obligations that companies must fulfill, including the provision of labor contracts, trade union committees, and social and health insurance for employees In contrast, management and community components extend beyond these compliance requirements Managerial responsibilities encompass four criteria that evaluate a firm's strategic approach to Corporate Social Responsibility (CSR), focusing on the existence of CSR supervision mechanisms, policies, committees, and awards Additionally, community-related CSR indicators encourage firms to engage in social activities that may not yield direct benefits for the company and are not legally mandated.

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 examines 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 connection While accounting measures provide historical data, they may be affected by inconsistencies and managerial manipulation (Branch, 1983) In contrast, market-based indicators reflect investors' assessments of a firm's profitability potential, making them more reliable (McGuire et al., 1988) A widely used market measure is Tobin's Q, which compares a firm's market value to its book value or replacement cost, as it simplifies the evaluation process without requiring a rate of return measurement (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 assess 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 by the ratio of net income to total equity Both ROA and ROE are widely used in significant studies, including those by Cochran and Wood (1984), Waddock and Graves (1997), and Wu and Shen (2013).

Explanatory variables

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

This study is pioneering in utilizing CSR-related information within the TCS framework to assess the impact of CSR on firm performance The CSR Index in the TCS enables an analysis of firms' CSR engagement levels in Vietnam, represented as an integer ranging from 0 to 16 Each firm has a unique CSR Index for each year in the sample period from 2010 to 2012, indicating that firms with a lower CSR Index participate in fewer CSR activities compared to those with a higher Index (refer to Table 3.5 in section 3.1.4 for detailed components of the CSR Index in this research).

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 following control variables are utilized in this study.

Firm size is a crucial indicator that significantly influences firm performance, making it a common control variable in performance studies (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 often engage in more CSR activities due to stakeholder pressures (Waddock and Graves, 1997; McWilliams and Siegel, 2000) Moreover, McWilliams and Siegel (2001) suggest 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 instead of total assets to account for industry scale differences and mitigate the effects of heteroscedasticity in large figures.

Firm age is a crucial control variable influencing both firm performance and CSR adoption behavior Research by Huergo and Jaumandreu (2004) suggests that older, more experienced firms are more likely to engage in CSR activities Additionally, Erhemjamts et al (2012) indicate that as firms age, their profit margins may decline, prompting them to adopt CSR strategies to enhance their brand image and reputation Firm age is quantified 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 components of Corporate Social Responsibility (CSR) can significantly enhance both product and process innovation, ultimately improving a firm's long-term performance Consequently, studies examining the CSR-performance relationship often incorporate R&D intensity as a critical control variable R&D intensity is typically assessed by the ratio of R&D investment to total assets or total sales However, due to incomplete R&D expenditure data for firms in the analyzed dataset from 2010 to 2012, this study may utilize a dummy variable to indicate R&D engagement In this context, R&D is assigned a value of 1 if a firm invests in R&D activities, while it is marked as 0 if there is no R&D expenditure.

Firm leverage is a crucial control variable in corporate finance, as highlighted by Sharfman and Fernando (2008), who suggest that companies with strong Corporate Social Performance tend to have higher leverage and bond yields due to easier access to loans Jensen (1986) supports this by proposing a positive relationship between leverage and firm performance through the free cash flow hypothesis Typically, leverage is measured as the ratio of total debt or total equity to total assets, and for the purposes of this study, leverage is specifically defined as the ratio of total debt to total assets (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 exports and overall firm performance Furthermore, Bernard et al (2003) highlight that export activities can enhance firm performance through the concept of "learning by exporting." Due to insufficient volume data from the VES for all sample years, this study utilizes a dummy variable to indicate a firm's export orientation, where export = 1 signifies participation in export activities and export = 0 indicates a lack of such activities.

The final goods ratio is considered a key determinant of corporate social responsibility (CSR) adoption, as companies producing final goods are likely to engage more in CSR activities to attract potential customers (CIEM, GSO, DERG, UoC, 2015) However, previous research lacks evidence linking this factor to firm performance, leading to its exclusion from performance estimations In this study, the final goods ratio is defined as the proportion of final products to total output based on sales value.

Numerous studies have explored the impact of ownership structure on firm performance, highlighting its significance in determining CSR adoption (CIEM, GSO, DERG, UoC, 2015) The relationship between ownership and performance remains a contentious issue among researchers, with many studies indicating a negative correlation for state-owned enterprises (SOEs) According to agency theory, Le and Buck (2009) argue that managers in state-owned firms, often politicians, may exploit company resources for personal gain Additionally, Boycko, Shleifer, and Vishny (1996) suggest that SOEs tend to be less efficient than private firms, as they prioritize political objectives over profit generation A contributing factor to this inefficiency may be the hiring practices in SOEs, which often favor political connections over merit-based selection.

Private firms often demonstrate a strong positive relationship with performance compared to state-owned enterprises (SOEs) Typically smaller in size, these firms can swiftly adapt to market changes, enhancing their efficiency relative to SOEs Additionally, foreign-owned firms tend to exhibit the highest levels of efficiency among all types of businesses, as noted by Zhang et al.

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 with their respective indicators: state, private, joint stock, and foreign.

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 explores the relationship between Social Responsibility (CSR) and firm performance, aiming to assess the impact of CSR on business outcomes To minimize regression bias, the framework incorporates various control variables that have been empirically shown to affect firm performance A thorough discussion of the definitions and calculations of these control variables will be provided in section 3.2.3 Within this framework, CSR is divided into three sub-components, including Labor.

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 basic 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 The analysis will focus on estimating two key models 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 serves as a vector for firm-specific characteristics that significantly influence CSR practices, including firm size (measured by the natural logarithm of total labor), firm age (natural logarithm of firm age), and ownership types (categorized as SOEs, private firms, foreign firms, and joint stock firms) Additionally, it considers the adoption of Research and Development (R&D), the proportion of final goods produced relative to total output, leverage (the ratio of total debt to total assets), and export orientation (as a dummy variable) These variables are chosen as regressors in the CSR participation function based on their established importance in prior empirical studies and reports (CIEM, GSO, DERG, UoC, 2015; Erhemjamts et al., 2012) A comprehensive discussion of these variables and their impacts on CSR participation and firm performance is presented in section 3.2.3.

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, including the ability to observe trends and behaviors of firms over time It combines time-series and cross-sectional observations, increasing variability, reducing collinearity among variables, and enhancing the reliability of estimations Additionally, panel data is better suited for tracking and measuring critical factors that may be overlooked when using only cross-sectional or time-series data, as these factors are essential to analyze on an annual basis.

This study employs both descriptive and quantitative analysis alongside a panel dataset to address its research problems To test the main hypotheses, it utilizes the Fixed Effect Model (FEM) and Random Effect Model (REM), which are the two most popular models for panel data The FEM assumes that individual-specific effects are correlated with independent variables, allowing researchers to measure the net effects of explanatory variables on the dependent variable while controlling for omitted variable bias However, FEM has limitations, including its inability to observe time-invariant components like gender or ethnicity, which are excluded from the model Additionally, if variations among entities are minimal over time, FEM may yield excessively large and unacceptable standard errors in the estimates.

The Random Effects Model (REM) assumes that individual-specific effects are uncorrelated with independent variables, allowing for the estimation of coefficients for time-invariant variables While REM can yield smaller standard errors compared to the Fixed Effects Model (FEM), it may produce biased estimates if omitted variables are present Given the potential for omitted variable bias, FEM may be more suitable than REM This study will utilize the Hausman test to determine the appropriate model for the dataset, testing the hypothesis that "the random effect model is effective and consistent." If the null hypothesis is rejected (p-value < 0.05), it indicates that FEM is the more appropriate choice over REM.

The performance equation (Model 2) may face two potential sources of endogeneity: omitted variables and simultaneity Omitted variables occur when certain influential factors are not included in the model, potentially affecting both corporate social responsibility (CSR) measures and firm performance Simultaneity bias arises from reverse causation, where CSR is influenced by firm performance While the Fixed Effects Model (FEM) can effectively mitigate omitted variable bias, it is unable to address the endogeneity issues stemming 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 for CSR, including sector dummies and prior year's income (Fodio et al., 2013), event dummies for 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 could not be identified that met the criteria of strong correlation with the CSR Index and exogeneity to firm performance, as well as prior validation in empirical literature The use of weak instruments can introduce significant bias, leading to this study's limitation in identifying appropriate CSR instruments Consequently, the research relies on basic panel data models like Fixed Effects Model (FEM) and Random Effects Model (REM), with a Hausman test applied to determine the most suitable model for analysis.

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 survey conducted by the Vietnam Business Council for Sustainable Development (VBCSD) and the Vietnam Chamber of Commerce and Industry (VCCI) assessed over 150 prominent companies to gain insights into their CSR practices.

A recent study reveals that while 60.56% of firms recognize three aspects of sustainable development and 47.2% possess basic knowledge of Corporate Social Responsibility (CSR), only 3.9% actively gather information to create sustainability reports Despite 76.05% of enterprises acknowledging the advantages of sustainability reports and committing to CSR, significant challenges persist in Vietnam's CSR implementation Pham (2011) highlights that these challenges stem from inadequate enforcement of new policies, a general lack of understanding of CSR among businesses, and the limited capacity of small and medium-sized enterprises to engage in CSR activities, which are 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 survey involving 400 SMEs to explore various CSR-related issues, focusing on improving their integration into global supply chains and promoting 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 by promoting the recognition and implementation of Corporate Social Responsibility.

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

Respondents in the CSR awareness survey can score between 0 and 3 for each statement, leading to a total possible score ranging from 0 to 60 This scoring system classifies enterprises into four awareness 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%) demonstrated medium awareness with scores between 41 and 50 Notably, 28.3% of respondents exhibited high understanding of CSR, indicating that a significant majority of Vietnamese SMEs possess a basic knowledge of CSR principles.

Source: Baseline Survey Report 2010 (UNIDO, 2011)

A summary of CSR awareness levels across various sectors, including electronics, leather and footwear, and textiles and garment, reveals that over 50% of enterprises in each sector exhibit medium awareness of Corporate Social Responsibility Furthermore, the awareness levels are relatively consistent across these industries.

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 of community involvement is notably lower Figure 4.4 further clarifies this trend by displaying awareness levels based on 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 topics, while 180 excel in labor-related matters In contrast, community responsibilities appear to be neglected, 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 on Corporate Social Responsibility (CSR) in Vietnam reveal that while most Vietnamese enterprises recognize the importance of CSR, they primarily focus on labor and consumer-related issues, often neglecting their responsibilities towards the community.

Descriptive analysis results

This study analyzes data from 19,305 observations of 6,435 Vietnamese firms surveyed in the TCS and VES datasets As shown in Table 4.1, a significant percentage of these companies participate in various aspects of Corporate Social Responsibility (CSR) practices, with a notable emphasis on labor-related activities.

From 2010 to 2012, over 96% of firms issued written labor contracts, with 100% compliance in 2010, reflecting the mandatory nature of these contracts under current laws Additionally, more than half of enterprises established trade unions and contributed to employees' social and health insurance, averaging 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 CSR compliance rather than beyond-compliance initiatives, such as management and community practices, which have seen limited engagement 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?

The analysis of Corporate Social Responsibility (CSR) attendance among firms of varying sizes and ownership types indicates significant differences in CSR criteria According to Tables 4.2 and 4.3, the maximum values for Labor CSR and Management CSR are four, whereas Community CSR shows a higher 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 in tables 4.2 and 4.3 reveals that Vietnamese firms show a strong inclination towards Labor CSR, reflected in its high mean value, while Community CSR attracts the least participation, demonstrating the lowest mean value across all firm sizes and ownership structures Furthermore, table 4.2 illustrates 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 As firm size decreases, the mean values of CSR aspects consistently decline, highlighting the importance of firm size in CSR engagement.

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 in corporate social responsibility (CSR) activities more frequently than other firm types, as indicated by the highest mean values of 3.865 for Community CSR, 1.891 for Management CSR, and 1.438 for Labor CSR Notably, the Labor mean value of 3.7 suggests that both state-owned and foreign firms are more active in labor-related initiatives, while many private firms tend to neglect CSR practices.

Table 4.4 summarizes key statistics from a study involving 19,305 observations across 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) is 3.56%, both exhibiting significant standard deviations of 5.41% and 9.05%, respectively, likely due to the diversity in firm size, industry, and ownership types among the sampled enterprises The mean score for Total CSR stands at about 5 points, with a maximum of 16, while Community CSR receives notably less focus, averaging only 0.783 out of a possible 8 Among control variables, firm size shows the greatest variation, ranging from zero to 9.953, calculated as the logarithm of employee count Additionally, the debt-to-total-assets ratio averages 44.7%, with a maximum of 98.5%, while other control variables primarily consist of dummy variables related to 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 a significant correlation between Total CSR and its sub-components, including Labor CSR, Management CSR, and Community CSR The correlation coefficient of 0.656 indicates a strong relationship between ROA and ROE, attributed to their similar calculation methods for return on assets and return on equity Furthermore, most other variables exhibit insignificant correlations, with coefficients falling below 0.6.

Table 4.5: Correlation Matrix of key variables

Empirical results

Determinants of CSR engagement

The analysis of firms engaged in CSR activities utilizes a model with the Total CSR Index as the dependent variable, as presented in Table 4.6, which shows the regression results for OLS, Random Effects, and Fixed Effects models The Hausman test results in Table 4.7 indicate that the Fixed Effects model is appropriate for explaining CSR adoption determinants, given a p-value of less than 0.05 Significant factors influencing the Total CSR Index at a 1% level include firm size, R&D investment, and the ratio of output as final goods Notably, larger firms are more likely to participate in CSR activities and achieve higher Corporate Social Performance (CSP), while firms involved in R&D exhibit a 0.4-point increase in their CSR Index compared to those that do not engage in R&D Additionally, firms that produce a higher proportion of final goods are more inclined to participate in CSR initiatives, likely to enhance their brand image and customer relationships.

The study reveals no significant relationship between firm age, export orientation, and the overall CSR Index While leverage demonstrates a marginal correlation, achieving a significance level of 10% in the Fixed Effects model, the descriptive statistics indicate that state-owned, foreign, and joint stock enterprises engage in more 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 examines the impact of the aggregate CSR Index on firm performance, measured by return on assets (ROA) and return on equity (ROE) According to the Hausman test results in Table 4.7, Fixed Effect Models are appropriate for analyzing both ROA and ROE The findings indicate a positive but modest relationship between CSR and ROA, with a coefficient of 0.27%, suggesting that a one-level increase in the CSR Index may lead to a 0.27 percentage point increase in ROA Additionally, larger firms tend to outperform smaller ones, while firm age and leverage exhibit a negative correlation with ROA The analysis also reveals performance variations across ownership types, with foreign firms potentially outperforming private firms, although the latter's dummy variable was excluded due to multicollinearity Furthermore, state-owned enterprises may demonstrate higher profitability compared to private enterprises, though this relationship 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 the regression results indicating that Total CSR positively influences return on equity (ROE), with an increase of one level in the CSR Index correlating to a 0.56 percentage point rise in ROE This positive association between CSR and firm performance aligns with previous research (Waddock and Graves, 1997; Cochran and Wood, 1984) and is supported by comprehensive reviews by Margolis et al (2007) Unlike the findings for return on assets (ROA), leverage demonstrates a significant and positive relationship with performance Additionally, the ownership structure impacts both ROA and ROE similarly, with foreign and state-owned firms exhibiting superior performance compared to private firms, as foreign enterprises are estimated to outperform 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 examines the distinct impacts of Labor, Management, and Community CSR on firm performance, specifically analyzing their effects on Return on Assets (ROA) and Return on Equity (ROE) using a Fixed Effects Model to control for omitted variable bias The results, detailed in Table 4.10, indicate that all three CSR components are likely to have a positive correlation with firm performance; however, Community CSR shows the weakest contribution, with coefficients of 0.26% for ROA and 0.4% for ROE This suggests that Vietnamese firms may prioritize other areas over community-related activities due to their modest impact on financial performance Conversely, Management CSR demonstrates the most significant positive influence on firm performance compared to Labor and Community CSR Additionally, the analysis reveals that firm size is positively related to performance, while firm age and leverage have a negative correlation.

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 prior research in both Western countries and Vietnam The analysis indicates that firm size positively correlates with performance, whereas firm age and leverage negatively affect it Additionally, ownership type plays a crucial role, with foreign and state enterprises outperforming private firms All three dimensions of CSR examined demonstrate positive relationships with firm performance, although their contributions vary; notably, community CSR shows a weaker correlation, while management-based CSR exhibits the strongest impact on performance.

The research indicates that while most Vietnamese enterprises recognize the importance of Corporate Social Responsibility (CSR) practices, their focus primarily lies on labor-related CSR activities, which are mandatory under Vietnamese law In contrast, management and community-based CSR initiatives receive significantly less attention, with less than 10% of firms engaging in education, infrastructure, or healthcare services This limited participation contributes to a low Total CSR Index, averaging only 5 out of a possible 16 points These findings align with the Baseline Survey Report 2010 (UNIDO, 2011) Additionally, the study highlights that larger enterprises, those involved in research and development, and those with a higher ratio of final goods are more inclined to engage 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

Adopting Corporate Social Responsibility (CSR) is crucial for Vietnamese firms as they integrate into international markets, enhancing both corporate competitiveness and societal benefits To promote participation in CSR activities, it is essential to implement supportive actions and policies This study provides recommendations for improving CSR practices in Vietnam, aimed at both the government and enterprises.

To enhance corporate social responsibility (CSR) awareness, it is essential to strengthen propaganda and implement supportive policies for businesses Recognizing business ethics and social responsibilities is crucial, as proper awareness leads to appropriate actions The improvement of CSR practices requires collaboration between the government and enterprises The government should promote CSR knowledge through seminars and direct dialogues, focusing not only on general CSR concepts but also on the significance and benefits of community-related activities that many Vietnamese firms often overlook These community CSR initiatives reflect the responsibilities of enterprises towards society, including environmental stewardship.

The government should establish a comprehensive roadmap to enhance corporate social responsibility (CSR) participation among enterprises, as many businesses may lack the necessary resources to engage in all CSR activities effectively This strategic approach can lead to significant improvements in education and poverty alleviation efforts.

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 significant influence on business strategies and performance, particularly in small and medium-sized enterprises (SMEs) Managers must first understand CSR practices to effectively guide their firms in engaging in these activities By actively participating in community improvement initiatives, they can foster a mutually beneficial relationship between businesses and the community This study provides evidence of a positive correlation between CSR and firm performance in Vietnam, encouraging enterprises to increase their involvement in CSR activities for greater 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 in more CSR activities as they can afford the associated costs In contrast, smaller enterprises should develop careful, step-by-step plans and strategies to gradually participate in CSR, enabling them to reap the benefits of such adoption Additionally, establishing a Code of Conduct for CSR standards is essential for all employees to ensure high-quality participation in CSR initiatives within the organization.

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

Many enterprises overlook Community CSR, viewing it as having minimal impact on firm performance However, increased participation in community-related activities is essential for enhancing overall Corporate Social Performance, ultimately benefiting both businesses and society.

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 research aimed to analyze a longer time span from 2010 to 2015; however, the datasets for TCS and VCS are only accessible for a shorter duration.

The study conducted by the author between 2010 and 2012 is limited by a short timeframe, preventing an analysis of 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 collection and merging of datasets, hindering the creation of balanced panel data The regression models may also face endogeneity issues related to the CSR-Performance relationship and unobserved factors, which the study does not address While employing strong instrument variables could mitigate these concerns, the dataset limitations hinder the identification of such instruments, potentially leading to biased estimations of the CSR-Performance nexus Future research is anticipated to address these limitations Furthermore, the study neglects industry-level and macro-level factors in Vietnam that could influence firm performance, resulting in an incomplete analysis of external influences on firms' characteristics.

Future research

This study investigates the relationship between Corporate Social Responsibility (CSR) and firm performance from 2010 to 2012, highlighting the need for future research to extend the timeframe for more accurate insights, as CSR's effects are often realized over the long term Additionally, it emphasizes the importance of incorporating both accounting indicators, like ROA and ROE, and market indicators to provide a more comprehensive view of firm performance To address endogeneity issues, future studies should consider utilizing robust instrument variables or developing more complex CSR models that include moderating factors, which can help minimize estimation bias and enhance the reliability of the analysis.

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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 evaluates the health and safety impacts of its products on customer wellbeing through a robust quality control system, which includes identifying any restricted substances present in its offerings.