Estimating the hidden corporate social performance of Japanese firms

Abstract

Purpose

Managers sometimes hide their level of corporate social performance (CSP) from investors, intentionally or unintentionally. The purpose of this study is to estimate such “hidden CSP” of firms.

Design/methodology/approach

In this study, it is assumed that Japanese public firms can be classified into two groups based on the difference in corporate social responsibility (CSR) awareness. Thus, the respondents to the CSR questionnaire survey are classified as the CSR-aware group, and the non-respondents are treated as the CSR-unaware group. It is further assumed that a significant relationship exists between CSP and a firm’s attributes, including financial performance and stock ownership. Under these assumptions, a model to estimate the CSP of non-respondents is constructed using the relationship between CSP and a firm’s observable attributes.

Findings

There is a significant latent gap between the CSP of respondents and the hidden CSP of non-respondents because of differences in firm size, foreign dependency of business and reputation and trust in the financial markets, rather than because of differences in financial performance. Insider-oriented ownership structures are negatively associated with CSP.

Research limitations/implications

The estimation model developed in this study depends on a set of assumptions. In particular, a stable relationship between CSP and firm-specific variables, i.e. there is no structural change during the observation period, is assumed. Despite these limitations, this study extends the CSR research perspective, as it makes it possible to estimate the hidden CSP of public firms.

Practical implications

In practice, the findings of this study surface a part of the missing CSR that investors need and that could alert non-respondent firms to the importance of CSR strategy and related disclosures to adapt to rapidly changing social and environmental business settings.

Originality/value

This study is the result of academic interest in examining the missing information related to CSR activities to obtain an overall picture of the CSP distribution of Japanese listed firms as a whole.

Citation

Suto, M. and Takehara, H. (2016), "Estimating the hidden corporate social performance of Japanese firms", Social Responsibility Journal, Vol. 12 No. 2, pp. 348-362. https://doi.org/10.1108/SRJ-08-2015-0106