Corporate Ethics vs. The Bottom Line

CSR in Beijing

Independent and dependent variable

Qualitative Case study

Research design Multiple case study and document review

Sampling selection and Data collections

Quantitative Survey

Questionnaire Design and scale measurement

Data collection and Response rate

Data Analysis of the Pilot test

Quantitative Data Analysis

Sampling Design

Reliability and Validity of Scaling Technique

Exploratory Factor Analysis

The overriding aim of the proposed project is to investigate the effect of CSR on the financial performance of Chinese companies. This, on one hand includes an investigation of how Chinese companies perceive the concept of CSR and how much they have incorporated the same into their corporate operations; and on the other hand, an exploration of the correlation between CSR and corporate performance. The specific research questions guiding the investigation have been restated;

RQ1: Is there a relationship between CSR and corporate performance?

RQ2: Does company CSR improve financial performance?

This chapter outlines the theoretical fundamentals and practical procedures that were deemed most suitable for responding to the research questions above.

3.1 - General Research Design

This study combines the qualitative and quantitative approaches in what Tashakkori and Creswell (2007) refer to as the 'mixed method design'. The authors express that the approach is still relatively new, and that its quality standards, methods, and concepts are still under contention. The researcher, all the same, deems it appropriate for a two-part study of this nature, which consists of a qualitative part one that employs the case study and document review techniques and a part two that makes use of quantitative surveys, to establish linkages and correlations between factors. Qualitative methods will enable the researcher to obtain more in-depth information about how Chinese companies perceive or value CSR, whereas Quantitative techniques will be crucial in ensuring reliability of collected data.

3.2 - Nature of the Study

Given the open-ended nature of the research questions, the study has been designed as an exploratory inquiry. Qualitative and quantitative data will be collected in a sequential order over a period of three months. The information being sought is of a rather confidential nature, and measures will be put in place to ensure that the identity of participants is protected. Participants will be made aware of the exact period of time for which the researcher intends to keep their records and identities, and given an assurance that any information gathered will be used for purposes of the research only.

3.2.1 - Theoretical Framework

Empirical research suggests that the relationship between CSR and CP is influenced by several variables, and that the effect on CP could be assessed on the basis of non-financial as well as financial indicators of performance. Luo and Bhattacharya (2006) put forth management attitudes, shareholder satisfaction, customer satisfaction, employee turnover, and employee satisfaction as the most fundamental non-financial indices that could be affected by the implementation of the CSR concept. The non-financial effect of CSR is, however, beyond the scope of this analysis, which focuses purely on the effect of CSR on financial corporate performance.

Independent Variable: this study adopts the stakeholder theory framework and the assumption that the overriding objective of any business unit is to balance the expectations of its stakeholders through its corporate activities, to develop a six-stakeholder criterion for quantifying the independent variable CSR. The six stakeholder dimensions -- employees, health contributions, education contributions, community welfare, environmental sensitivity, and consumer safety were identified from company annual reports during the pilot study.

Dependent Variable: ROA and ROE will be used to quantify the dependent variable, financial performance. Ullmann (1985) points out that such external factors as industry performance, corporate debt level, and company size could also have an effect on CP, and that they have to be controlled in order to separate CSR as a single variable. The study makes use of total assets and total sales instead of firm size in selecting sample participants as a way of ensuring that start-up units and small firms are excluded, and hence, the effects of debt level and industry performance are minimal.

The study, therefore, hypothesizes that:

H1 the higher the level of CSR towards employee relations, the higher the level of ROA

H2 the higher the level of CSR towards community relations, the higher the level of ROA

H3 the higher the level of CSR towards environmental relations, the higher the level of ROE

H4 the higher the level of CSR towards customers relations, the higher the level of ROE

H5 the higher the level of CSR towards education relations, the higher the level of ROE

H6 the higher the level of CSR towards health relations, the higher the level of ROA

The hypothesized model is as shown in fig 3.1

CSR

CP

3.2.2 - Part One-Qualitative Case Study

Part 1 attempts to answer the following two research questions:

RQ1: Is there a relationship between CSR and corporate performance?

RQ2: Does company CSR improve financial performance?

Research Design: Multiple Case Study and Document Review: Qualitative methods will be applied in pursuit of answers to the research questions above. In this study, a case study with document (annual corporate financial report) review will be employed. Naumes and Naumes (2006) express that case studies are a rich source of qualitative information that provide "an opportunity to study an actual situation in a realistic setting" (p. 64). Furthermore, theories formulated from data collected through case research are often high in empirical validity given that such research "allows for the ability to develop solutions and then test them in similar studies" (Naumes and Naumes, 2006, p. 64). Another fundamental strength of case research, the author posits, is that it allows for the in-depth investigation of causal responses that are almost impossible to study using quantitative methods.

China has a profound culture and a long history, and the researcher believes that it would be reasonable to study how the concept of CSR has evolved therein over the years. Data will be collected through reviews on financial reports, documentaries, archival records, and catalogs of sampled companies. The within-case analysis will be used as a basis for comparison; financial performance prior to the adoption of CSR will be compared to performance after its adoption

Sample Selection: as mentioned earlier on, the selection criterion bars small firm and start-up units from participating. The purposeful sampling technique will be applied in selecting the qualitative sample. Five established companies with excellent reputations in the treatment of employees and compliance with environmental safety policies within Beijing will be identified and selected, with the help of the Municipal Environmental Protection Bureau. Attention will be paid to the steel industry, which, as Mao, et al. (2013) point out, accounts for almost half of the total pollution in China. The cutlery industry is another major pollutant, emitting tons of harmful chemicals to the atmosphere every day due to heat treatment, electroplating and plating processes. Two companies within the cutlery industry and three within the steel manufacturing industry in Beijing will be selected for analysis.

Data Collection: Data will be collected through reviews on company financial reports, and verified using information provided by participating employees in the survey questionnaire. Additionally, the researcher will, with the help of the Beijing Municipal Environmental Protection Bureau, pay brief visits to the factories' facilities, including dormitories, workshops, waste water stations, and water tanks to physically assess the extent of individual companies' CSR practices. Figure 3.2 presents an overview of the proposed research methodology.

Fig 3.2: Overview of the Proposed Research Methodology

Methods & Steps

Pilot study

-Identification of five suitable companies with the help of the Beijing Municipal environmental protection bureau

-Review of companies' annual financial reports

-Browsing corporate websites

-Reviewing archived catalogs and financial reports

Part One: Qualitative Case Studies

comparison of financial performance prior to, and after the adoption of CSR

Within-case analysis to demonstrate change in financial performance due to the adoption of CSR

Part Two: Quantitative Survey

-10 employees (respondents) from each of the selected companies

-Questionnaires

-Exploratory factor analysis

-SPSS

3.2.3 - Part Two: Quantitative Survey

Questionnaire Design and Scale Measurement: the questionnaire, constructed entirely in English, will be the chief instrument of data collection in this particular study. It employs both the typical form of fixed-response alternative questions requiring respondents to choose from a pre-determined options set; and qualitative open-ended administered questions that allow respondents to freely express themselves. The questionnaire is made up of two sections; section A containing information on demography (age range, education level, gender, and number of years worked at the company); and section B. composed of questions on CSR, including CSR activities undertaken by the company, reasons for such undertaking, effects of undertaking CSR, and rating of corporate commitment to CSR. The questionnaire contains a total of thirty questions with answers ranging between 'neutral'; 'strongly disagree'; 'disagree'; 'agree'; and 'strongly agree'. See appendix 1 for the questionnaire's full details (page,19).