Corporate social performance: why it matters? Case of Taiwan

Abstract

Purpose - The objective of this article is to explore the relationship between corporate social performance (CSP) and corporate financial performance (CFP) of firms in Taiwan, as the empirical evidence of Taiwan firms is scarce. Design/methodology/approach - This paper studies the empirical relation between CSP and CFP using a sample of 71 Taiwan-based companies during 2005-2011. CSP data are a composite of two Taiwan\'s CSP ratings, and CFP data are retrieved from Taiwan Economic Journal database. Two control variables, R&D investment (R&D) and industry type (IND), are included in our models. The multiple regression is used as a statistical analysis tool. Findings - Our findings indicate a significantly positive CSP-CFP relationship of firms in Taiwan. Furthermore, our study reveals that the CSP in the non-manufacturing sector is more highly related with CFP than the case in the manufacturing sector in Taiwan. Originality/value - First, Our findings are consistent with the majority of recent research and are supported by the stakeholder theory. The paper argues that Taiwan firms should incorporate CSP into their business strategies for improving their competitive advantages. Second, our findings argue that Taiwan firms in the manufacturing sector should learn the best CSP practices from firms in the non-manufacturing sector to maintain and enhance their sustainability. Third, this paper extends the subject study of Taiwan scenario, and it is the first paper combining two CSP local ratings as the proxy for the CSP measure.