This paper provides a systematic analysis of how hometown ties, the most common and distinct bases for interpersonal ties to build upon in China, could influence corporate governance in Chinese corporations by focusing on its impact on CEO dismissals and corporate social responsibility. We find that hometown ties between CEOs and board chairs reduce the likelihood of CEO dismissals and that the negative relationship between firm performance and CEO dismissals is weaker for hometown-connected CEOs in locally administered state-owned enterprises, for (...) inside CEOs, for firms located outside board chairs’ hometowns, and for firms operating in regions with low social trust. Moreover, we find consistent evidence that hometown ties affect Chinese firms’ engagement in corporate social responsibility. Our study highlights the important role of hometown ties in Chinese relationship-based corporate governance. It also advances a normative ethical assessment of hometown-based favoritism by highlighting its distinct dynamics and impacts on focal actors and the third parties in specific contexts of actions. (shrink)

Despite the rising interest in environmental strategies, few studies have examined how managerial cognition of such strategies influences actual innovation capability development. Taking a managerial cognition perspective, this study investigates how managers’ perceptions of institutional pressures relate to their focus on proactive environmental strategy, which in turn affects firms’ realized innovation capability. The findings from a primary survey and three secondary datasets of publicly listed companies in China reveal that managers’ perceived business and social pressures are positively associated with their (...) focus on proactive environmental strategy, which consequently fosters innovation capability development. Moreover, state ownership and government administrative control weaken the impact of managerial focus on proactive environmental strategy on innovation capability. These findings have important implications for how managerial cognition supports environmental strategy and organizational capability building under the influence of institutional pressures and government intervention. (shrink)

Drawing from the stimulus-organism-response model, this study examines how and under what circumstances perceived environmental corporate social responsibility affects innovative behavior of employees in the context of environmental protection. Using a sample of 398 employees from different firms in the high energy-consuming industry of China, the results indicate that, at first, perceived ECSR provides a positive effect on organizational identification. Secondly, organizational identification has a positive influence on the innovative behavior of employees. Thirdly, organizational identification plays an important mediating effect (...) between perceived ECSR and the innovative behavior of employees. Fourthly, both the effect of perceived ECSR on organizational identification and the indirect effect of perceived ECSR on the innovative behavior of the employees via organizational identification will be stronger when the levels of organizational trust are high. These findings add new insights into the perceived ECSR-employees’ innovative behavior relationship and provide important managerial implications for enhancing ECSR perception to improve the innovative behavior of employees. (shrink)

Enterprises are the market players for carbon reductions and carbon trading, and they are also the significant driving force in a low-carbon economy and society. Using the data of A-share listed companies from 2010 to 2016, this study uses a difference-in-differences model to examine the effects of the low-carbon city construction on corporate carbon reduction performance. Consistent with our hypotheses, we find that the low-carbon city construction promotes corporate carbon reduction performance. Further analysis indicates that the policy effect is stronger (...) for state-owned enterprises than non-state-owned enterprises. Moreover, environmental quality can affect the promotion of local government officials, which is more prominent in pilot low-carbon cities, and political promotion incentives significantly improve corporate carbon reduction performance. Furthermore, the highest emission reduction effects come in the fourth year after adopting a carbon reduction policy and are concentrated among the firms in the eastern region. Overall, our findings offer a new point view for a deeper understanding of the improvement of corporate carbon reduction performance, and provide microscopic evidence for the objective evaluation of the environmental effects of China's low-carbon city pilot policies. (shrink)

Many countries have regulations that require firms to engage in minimum levels of corporate social activities in areas such as the environment and social welfare. In this paper, we argue that changes in a firm’s compliance with CS regulations are reflected in its reputation for corporate social responsibility, which affects the firm’s performance. The performance impacts depend on whether the firm’s CSR reputation in the current and prior periods is positive, neutral, or negative. Our theoretical framework draws on the reputation (...) literature and on the concepts of recency bias, which weights the present more heavily than the past, and negativity bias, which weights negative assessments more heavily than neutral or positive assessments. We test our hypotheses on a sample of 7317 banks over 1992–2007 where we compare a bank’s return on assets with its current and prior compliance ratings under the U.S. Community Reinvestment Act. We find that changes in CSR reputation have predictable, asymmetric, and sizeable impacts on firm performance. For example, for an average bank with $1 billion in assets, gaining a positive CSR reputation translates into a rise in profits of 4.04%; gaining a negative CSR reputation results in a drop in profits of − 7.8%. (shrink)

Following the financial crisis and recent recession, the center of gravity of global economic growth and competitiveness is shifting toward emerging economies. As a leading and increasingly influential emerging economy, China is currently attracting the attention of academics, practitioners, and policy makers. There has been an increase in research interest in and publications on issues relating to China within high-quality international academic journals. We therefore organized a special issue conference in conjunction with the Journal of Business Ethics in Lhasa, Tibet, (...) on May 19–20, 2014, on Business Ethics in Greater China: Past, Present and Future. The papers for the special issue focused on the intersection of ethics and finance, and fit within one of the three themes: environment and sustainability, corporate social responsibility, and fraud. Within these themes, issues of intellectual capital protection, gender equality, political connections, regional development, investor protection, corporate stewardship, trust and corruption, and corporate transparency each play a significant role. In this paper, we survey these studies and the related literature to provide a comprehensive coverage of business ethics and finance issues that affect China. (shrink)

This study focuses on CEO hubris and its effect on corporate unethical behaviour—pollution in particular, and in addition examines critical institutional contingencies [state ownership, political connection and industrial competition] which may moderate this effect. With data from over-polluting listed firms based on the real-time pollution monitoring system in transitional China from 2015 to 2017, we find that CEO hubris is significantly positively related to firm pollution, and that the moderating role of SO is not significant, that PC positively moderates the (...) hubris–pollution relationship and that industrial competition negatively moderates this relationship. These findings contribute to research on the upper echelon theory, institutional theory and the growing literature on emerging economies. (shrink)

This study aims to enrich our understanding of the relationship between political connections and the adoption of environmental corporate socially responsible investments. In addition to the individual-level political connections, i.e., entrepreneurs’ personal ties to government officials, we propose in China the creation of Communist Party of China branches in privately owned firms serve as organizational and institutionalized dimensions of political connection building. Drawing on the social exchange theory, this paper details how CPC branches function in privately owned firms and how (...) entrepreneurs are motivated by the reciprocal logic to engage in ECSR. We also supplement this main effect by examining the boundary conditions of it at the firm and regional level. Using a dataset with 17,690 firm observations in China, we find that the existence of CPC branches gives rise to the ECSR investments and the firm-level contingencies such as centralized governance and financial constraints, and the regional-level contingencies such as the development of the market system, are important moderators that shape the association of political links and ECSR investments. These findings have ample implications to understand the ECSR activities and extend social exchange theory beyond the individual level on which it is typically applied. (shrink)