SOAS Research Online

Abstract

Meeting the needs of stakeholders, as an element of CSR, requires a delicate balance of meeting these needs and ensuring profitability. Guided by the legitimacy theory and the stakeholder theory, this paper assesses the significance of meeting stakeholder needs and examines the types of stakeholders that managers pay close attention to. Using a fixed-effects model on 859 Chinese manufacturing firms and a regression analysis, the results show a positive link between corporate social responsibility (CSR) activities and organisational financial performance via both accounting and market measures in the Chinese manufacturing market. Furthermore, the primary objective of companies is to maximise shareholder returns while also meeting societal needs. The results also indicate that responsibility to shareholders and employees and growth potential have significant positive impacts on a company’s market value. This research demonstrates the need for companies to engage in CSR activities, as this can establish an elevated level of financial performance. Furthermore, attention needs to be paid to other stakeholders in corporate CSR activities to engage them and sustain their commitments towards an organisation’s productivity, growth, and sustainability. This is the first study to examine the power of influence from different stakeholders using legitimacy theory. Secondly, it is the first study to evaluate this influence using the Chinese manufacturing industry, which is, arguably, one of the largest in its field.