Abstract
This study addresses two issues. First, does corporate social performance matter in Hong Kong. Second, if yes, is it relevant to some industries more than others. To answer these questions, we develop a corporate social performance index (CSP) to measure the quality of corporate social performance of major Hong Kong listed firms. The criteria are based on the OECD Principles of Corporate Governance. Using the 3-year period from 2002 to 2005, we find that firm valuation is positive and significantly associated with CSP. Interestingly, this relation matters less in China related firms and firms with a concentrated ownership structure. The results also show that CSP impacts firm valuation more positively when the firm is in the service sector. We further find that CSP is positively related to the market valuation of the subsequent year.
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Notes
The HSI is the most widely quoted performance indicator of the Hong Kong stock market. In 2002, the HSI contained 33 constituent stocks, representing about 70 % of the market capitalization of all eligible stocks listed on the Main Board of the HKEx. The number of HSI constituent stocks increased to 38 in June 2006. The HSHKCI is composed of the largest Hong Kong companies in addition to the HSI constituent stocks. The HSCCI and HSCEI constituent stocks are China-related companies listed in Hong Kong. HSCCI covers red-chip companies and HSCEI covers H-share companies. Red-chip companies are companies incorporated in Hong Kong but controlled by state-owned organizations in China. The Chinese state, provincial, or municipal organization(s) that are the dominant owners must hold at least 35 %. In contrast to red-chips, H-share companies are incorporated in mainland China. China-related firms account for 30 % of the total number of listed companies in Hong Kong and more than 60 % of the total market turnover in 2006.
To test robustness, this study also uses Tobin’s Q as another proxy for market valuation. The findings are consistent with those reported in the following sections and are not provided here.
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Cheung, YL., Jiang, K., Mak, B.S.C. et al. Corporate Social Performance, Firm Valuation, and Industrial Difference: Evidence from Hong Kong. J Bus Ethics 114, 625–631 (2013). https://doi.org/10.1007/s10551-013-1708-0
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DOI: https://doi.org/10.1007/s10551-013-1708-0