Original Research

SAGE Open
January-March 2023: 1–16
Ó The Author(s) 2023
Firm Performance and Corporate Social DOI: 10.1177/21582440231152123
journals.sagepub.com/home/sgo
Responsibility: Spatial Context and Effect
Mechanism

Jiafeng Gu1

Abstract
This study investigates the effect of firm performance on corporate social responsibility (CSR) in a specific spatial context.
The results for a sample of 1,557 listed companies in China suggest that a firm’s CSR performance level is influenced by that
of nearby firms. This study also confirms the indirect link between financial and CSR performance through the mediating role
of institutional and executive shareholding rates. In addition, the empirical evidence in this study not only supports the spatial
context-sensitive thesis but, more importantly, proposes a spatiotemporal context-sensitive thesis. It provides strong empiri-
cal support for the true relative value of the spatiotemporal context affecting CSR performance, which yields important theo-
retical, methodological, and policy implications.

Keywords
corporate social responsibility, mediating effect, spatial context, institutional shareholding ratio, executive shareholding ratio

Introduction spatial context defined in terms of neighboring compa-

There is a partially bidirectional relationship between
corporate performance and corporate social responsibil-
ity (CSR; Ratajczak, 2021). Generally, this relationship
is positive (Lee & Yang, 2022); however, it may occa-
sionally be negative (H. Wang & Choi, 2013) and under
certain circumstances, it is not significant (Kreander
et al., 2015). Despite their mixed conclusions, past stud-
ies have one basic point in common: they ignore the
effect of the spatial context on CSR. Thus, the above-
mentioned viewpoint can be called the ‘‘spatial context-
neutral’’ thesis. In reality, the situation is clearly more
complex than these mixed results suggest.
In recent years, the spatial context-neutral thesis has
been questioned and challenged by several scholars. An
alternative viewpoint asserts that spatial context is signif-
icantly associated with CSR. This viewpoint is known as
the ‘‘spatial context-sensitive’’ thesis (Gu, 2021a, 2022d).
B.-J. Chang and Han (2015) found that the spatial con-
text plays an important role in CSR. More recently,
research conducted based on data from the United States
(K. Chang et al., 2021), Canada (Firoozi & Keddie,
2022), China (Gu, 2021b), and other emerging markets
(Zamir & Saeed, 2020) has supported the spatial context-
sensitive thesis. However, how spatial context conditions
the prospects for firm performance and CSR—with the
nies as local spatial structural conditions—remains con-
troversial. Although many researchers have attempted to
address this question over the past two decades, the
answer remains unclear.
Financial performance affects CSR (K. Huang et al.,
2020). Companies with good financial performance have
more resources and investment more in enhancing CSR
and can therefore create better CSR performance (Khan
et al., 2019; Torugsa et al., 2012). Some studies have
pointed out that mediating variables often exist between
firm performance and CSR (Ali et al., 2020; H. Wang &
Choi, 2013). These studies belong to the category of spa-
tial context neutral theses. Nonetheless, the relevance of
the spatial and time dimensions of the external context
and how they combine has rarely been addressed at the
micro level of the enterprise. Accordingly, research on
the effect mechanism of firm performance on CSR
within the spatial context framework is rare. It is
1
Peking University, Beijing, China
Corresponding Author:
Jiafeng Gu, Institute of Social Science Survey, Peking University, Room 445,
Science Building 5, Peking University, No.5 Yiheyuan Road, Beijing 100871,
China
Email: isssgujf@pku.edu.cn

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2 SAGE Open
important to present and assess a model that verifies the
effect mechanisms of spatial context and firm perfor-
mance on CSR. Therefore, it is necessary to investigate
the influence of spatiotemporal context on CSR.
The legitimacy theory of CSR assumes that an organi-
zation with an implicit social contract with society
encourages companies to conduct CSR reporting (Islam,
2016; Michelon et al., 2015). In 2006, only 32 Chinese
listed companies published CSR reports (Y. Gao, 2011).
Subsequently, the number of Chinese listed companies
publishing CSR reports has grown rapidly, presenting
certain spatial characteristics. Listed firms located in eco-
nomically advanced regions in China are more likely to
engage in CSR (Pan et al., 2018). The CSR reporting of
listed companies in China varies by region (Z. Chen,
2017). Although China has a unique culture and system,
its experience of the CSR of listed companies is often
similar to that of other developing countries (S. L. Yang
et al., 2015) and of developed countries (Wu et al., 2020).
As the largest emerging market and second largest econ-
omy worldwide, research on the CSR of Chinese listed
companies will not only help promote CSR investment
and development in emerging economies but also benefit
Western developed countries. However, in-depth studies
on the effect and mechanism of the spatiotemporal con-
text of Chinese companies’ CSR practices are rare.
Nevertheless, the integration of the spatial and time
dimensions of the external context may be positively
linked to CSR performance, as we will explore later in
this work.
This study contributes to the literature on CSR by
empirically evaluating the spatial context-neutral thesis
versus the spatial context-sensitive thesis, and by study-
ing the increasingly prevalent issue of the effect of firm
performance on CSR. More importantly, it attempts to
integrate the spatial and temporal dimensions of the
external environment to form a spatiotemporal context
and to explore the mechanism of its influence on CSR
performance. Although this study was implemented in
the Chinese context, the findings can be generalized to
other countries.
The remainder of the paper is organized as follows:
Section 2 presents the analytical framework and hypoth-
eses. Section 3 describes the data collection and methods.
Section 4 provides quantitative research results. Section
5 discusses the results, and Section 6 concludes.
Literature Review and Hypothesis
Development
The assumption of a spatial context-neutral thesis is that
CSR should not vary depending on a firm’s precise spa-
tial circumstances. However, there is a peculiar inconsis-
tency regarding how companies engage in CSR activities
in different spatial contexts. For example, Husted et al.
(2016) showed that US firms located in large cities engage
in more CSR activities. Moreover, CSR differs among
countries, such as Denmark, the United Kingdom, the
United States, South Africa, and China. Major differ-
ences in CSR can be observed between Anglo-American
countries and Central European and Scandinavian coun-
tries (Matten & Moon, 2008). Griesse (2007) pointed out
that, in addition to the political and economic context,
there is another important reason for this difference in
CSR: the geographic context. However, when scholars
explain the differences in CSR between different regions
or countries based on a spatial context-neutral thesis,
they often emphasize political, economic, and social con-
texts and ignore the spatial background. Consequently, it
is easy to draw partial conclusions.
In the spatial context-neutral thesis literature, most
empirical models of firm performance and CSR have
examined links from a single firm’s attributes to its CSR
behavior, largely ignoring spatial independence among
neighboring firms (Endrikat et al., 2014; Lu et al., 2014;
Rodriguez-Fernandez, 2016). However, an increasing
number of studies have discovered the effect of the spa-
tial context on CSR and concluded that a company’s
CSR is highly dependent on the CSR of other firms in
the same region (K. Chang et al., 2021; Firoozi &
Keddie, 2022; Zamir & Saeed, 2020). Park et al. (2017)
found that the spatial context affected the relationship
between risk and CSR significantly. In addition, the spa-
tial context in which the regional headquarters is located
has an effect on CSR (Gruber & Schlegelmilch, 2015).
This view is common in the literature on CSR spillover
effects (Y. H. Chen et al., 2016; W. Wang & Korschun,
2015; H. Zhang et al., 2016), which often have spatial
characteristics (Gond et al., 2018; Lantos, 2001).
However, in these studies, the spatial context refers
mainly to geographical and regional factors, and the
influence of the spatial context formed by neighboring
companies on CSR has rarely been explored.
According to Tobler’s first law of geography, every-
thing is related to everything else, but nearby things are
more related than distant things (Miller, 2004). As a
result, significant strategic interactions exist between
neighboring firms when engaging in CSR. The spillover
effect tends to be characterized by spatial proximity, that
is, the spatial spillover mechanism (Franta et al., 2011;
Gu, 2022c). However, from a spatial context-sensitive
perspective, scholars have attached importance to spatial
contexts such as regions and countries, while ignoring the
local spatial context formed between neighboring firms.
To investigate the effect of the local spatial context—
defined as local spatial structural conditions in terms of
neighboring companies—on CSR, it is necessary to test
the spatial lag effect of CSR (Gu, 2021b). The spatial lag
Gu
variable represents the average CSR of other companies
adjacent to the target company and constitutes the local
spatial context of the target company in terms of CSR
(Anselin, 1988; Gu, 2022a). CSR often has a positive spil-
lover effect on neighboring companies (H. Zhang et al.,
2016). For a large sample of US firms over 1998 to 2009,
Husted et al. (2016) found robust evidence that firms
located in areas characterized by high local CSR density
scored higher in CSR engagement. Therefore, the emer-
ging CSR research on spatial lag is aligned with the
broader academic spatial context-sensitive thesis litera-
ture on CSR in predicting the following:
Hypothesis 1: The spatial lag will have a positive effect
on CSR.
In research on the effect mechanism of corporate per-
formance on CSR, the role of mediating variables is rele-
vant. Equity structure, that is, the institutional and
executive shareholding ratios, may mediate the relation-
ship between firm performance and CSR. Institutional
investors are not only pursuing profits but also pay
attention to CSR and improving business and social rela-
tions (Y. Zhang et al., 2020). Institutional investors have
stronger risk aversion and are therefore more inclined to
hold corporate stocks with good social responsibility
performance (Riedl & Smeets, 2017). Top executives play
a pivotal role in all aspects of CSR decision making and
implementation (Ma et al., 2020). Therefore, examining
the mediating effects of these two variables is necessary.
It is generally considered that the relationship between
corporate performance and CSR is mutually reinforcing
(W. Wang & Korschun, 2015); CSR investment is
restricted by corporate performance (Miko1ajek-
Gocejna, 2016; Rodriguez-Fernandez, 2016). The fulfill-
ment of CSR requires the investment of additional
resources, an important source of which is the redundant
resources of the company (Tista et al., 2021). According
to slack resource theory, slack resources increase CSR
expenditure by increasing the free cash flow of enter-
prises (Islam et al., 2021). Slack resources can enable
enterprises to make timely adjustments to their policies
and strategies and help further stabilize their earnings,
which may provide more policy and financial support
for the fulfillment of CSR (Wasiuzzaman et al., 2022).
Higher financial slack tends to diversify across multiple
CSR dimensions (Bouslah et al., 2022). High-discretion
slack resources allow R&D-intensive firms to be more
balanced in their CSR (Fu et al., 2020).
To some extent, slack resources are conducive to the
improvement of financial performance (C. Chen et al.,
2022). The better a company’s financial performance, the
more willing it is to spend on CSR (Nguyen et al., 2020).
3
Companies with good performance often have more
slack resources (Y. Yang et al., 2021). Therefore, such
enterprises are more willing to engage in CSR (Oware &
Mallikarjunappa, 2022). Companies with good perfor-
mance continue to implement CSR strategies to consoli-
date their market position (Brammer et al., 2007; Meier
et al., 2021). Under certain conditions, the effects of slack
resources on firm performance are significantly positive
(Y. Zhang et al., 2020). Therefore, there is a positive rela-
tionship between firm performance and CSR under slack
resource theory. Based on these studies, the following
hypothesis was proposed:
Hypothesis 2: Firm performance will have a positive
effect on CSR.
Stakeholder theory is typically used to explain CSR
behaviors (Kumar & Singh, 2022). The Chinese stock
market expanded from approximately RMB 4.83 trillion
in 2003 to over RMB 39.09 trillion in 2018, accounting
for more than 10% of the global market (Carpenter
et al., 2021). More importantly, the holding proportion
of institutional investors grew rapidly, increasing from
approximately 0.95% of the total Chinese market capita-
lization in 2003 to more than 50% in 2019 (Fwa et al.,
2020). Institutional investors have become important sta-
keholders in the CSR activities of Chinese listed compa-
nies and directly affect CSR. At the same time, many
Chinese listed companies have implemented executive
shareholding to incentivize company executives and
improve company performance (Ding et al., 2012). As
two important stakeholders in a company’s internal con-
trol system, institutional investors and stockholding
executives have become increasingly important to the
relationship between company performance and CSR.
However, there are still relatively few studies on possible
mediating effects.
Institutional investors urge enterprises to fulfill
their social responsibilities (Frias-Aceituno et al.,
2013; Y. Zhang et al., 2020), can improve labor rela-
tions (Nofsinger et al., 2019), and formulate reasonable
executive compensation policies to promote CSR activ-
ities (Waring & Lewer, 2004). These examples show a
positive relationship between institutional shareholding
and CSR. Institutional investors must take appropriate
action to ensure the rate of return (Sethi, 2005; Sparkes
& Cowton, 2004). There is a positive relationship
between institutional investor attention and CSR
engagement (Y. Zhang et al., 2020). Institutional inves-
tors’ site visits are positively associated with CSR (X.
Chen et al., 2021); therefore, the better a company’s
performance, the more likely it is to be favored by
institutional investors, and the higher the institutional
4 SAGE Open
shareholding ratio will be (Koh, 2007). In other words,
a positive relationship exists between corporate perfor-
mance and the institutional shareholding ratio.
According to the research above, the following
hypothesis is proposed:
Hypothesis 3: The institutional shareholding ratio
mediates the relationship between firm performance
and CSR.
This hypothesis includes the following two sub-
hypotheses:
Hypothesis 3a: The institutional shareholding ratio
will have a positive effect on CSR.
Hypothesis 3b: Firm performance affects the institu-
tional shareholding ratio positively.
Stockholding executives actively respond to stake-
holders’ expectations, make charitable donations, and
conduct other CSR activities (Al-Shammari et al., 2022;
Waldman & Siegel, 2008). In Indonesia, executive share-
holding affects CSR activities positively (Jia & Zhang,
2013). Senior executives’ shareholding in listed compa-
nies can help them take more social responsibility (Dewi
& Mukhtaruddin, 2014; D. Gao et al., 2022). In other
words, there is a positive correlation between the execu-
tive shareholding ratio and CSR. To better motivate
executives, companies with good performance often pro-
vide them with opportunities to hold stocks and subse-
quently achieve long-term sustained improvement in
performance (Filatotchev et al., 2005; Guo & Shen,
2019). This aligns the interests of executives and the com-
pany and ensures company performance (Hanson &
Song, 2003; W. Huang & Boateng, 2017); therefore,
under normal circumstances, there is a positive correla-
tion between company performance and executive
shareholding.
Thus, the following hypothesis is proposed:
Hypothesis 4: The executive shareholding ratio med-
iates the relationship between firm performance and
CSR.
This hypothesis includes the following two sub-
hypotheses:
Hypothesis 4a: The executive shareholding ratio will
have a positive effect on CSR.
Hypothesis 4b: Firm performance affects the executive
shareholding ratio positively.
Figure 1 is a graphical representation of the proposed
theoretical model and the hypotheses.
The influences of spatial contextual-level determinants
versus enterprise-level determinants on CSR are properly
simulated in this theoretical model. Therefore, it can be
used to empirically evaluate the spatial context-neutral
thesis versus spatial context-sensitive thesis in CSR
research. At the same time, the model can also be used
to examine the effect mechanism of company perfor-
mance on CSR in a specific spatial context. Thus, it can
be used to identify the most relevant external mechanism
(spatial context) and internal mechanisms (firm perfor-
mance, equity structure, and other control variables)
from local and neighborhood levels to explain CSR
performance.
Method
Data
We selected companies listed on the Shenzhen Stock
Exchange (SZSE) of China as the research sample,
including ordinary A-share companies and small- and
medium-sized enterprises. The SZSE was founded in the
1990s and has witnessed the development of the capital
market in China.
In China, the Shanghai Stock Exchange (SSE) is posi-
tioned as the main board market, serving large enter-
prises. The companies listed on the SSE are typically
large companies with dominant positions in key
industries. The SZSE is positioned as a small- and
medium-sized board market, serving mainly small- and
medium-sized enterprises. Companies listed on the SZSE
are relatively small in scale, but more numerous. With
the transition of the Chinese economy, more attention
has been given to motivating small- and medium-sized
enterprises to engage in CSR (Yu et al., 2020). In addi-
tion, there are certain differences in CSR practices
between companies listed on the SZSE and SSE (Li
et al., 2013). To control the effect of the listing location
and focus on the CSR of small- and medium-sized enter-
prises, we only selected companies listed on the SZSE as
sample companies for our study. Because B-share com-
panies listed on the SZSE have a different accounting
currency from other types of companies, and their situa-
tions are more complicated, these companies do not fall
within the scope of this study. After sorting, summariz-
ing, and cleaning the data and eliminating missing values
and outliers, 1,557 companies were selected for the sam-
ple. Data were obtained from the China Stock Market
and Accounting Research Database.
CSR data were obtained from the Social
Responsibility Evaluation System of Hexun Company,
located in Beijing since 1996. This system, released by
Hexun.com, examines the social responsibility perfor-
mance based on five aspects: listed company share-
holder responsibility: employee responsibility, supplier,
Gu
Figure 1. Theoretical model. The relationship between firm performance, corporate social responsibility (CSR), and all the hypotheses.
customer, and consumer rights responsibility, environ-
mental responsibility, and social responsibility. Each
aspect establishes 13 secondary and 37 tertiary indica-
tors for conducting a comprehensive social responsibil-
ity evaluation. Hexun’s CSR reporting evaluation
system is crucial to mainstream evaluation methods,
and has been widely used in academic studies (Li et al.,
2013; Zhong et al., 2019).
Variables Measurement
Dependent Variables. CSR practices are generally mea-
sured based on two aspects: process and performance
(Stainer, 2006). The academic community and industry
have always focused on CSR performance (Battisti et al.,
2022). Therefore, this study considers CSR performance
as the core dependent variable. In terms of an opera-
tional definition, CSR performance is measured by the
2018 overall CSR score of listed companies in China
released by the Hexun.com Social Responsibility
Evaluation System (Li et al., 2013; M. Yang et al., 2019;
Zhong et al., 2019). Moreover, the institutional and exec-
utive shareholding ratios, two variables measuring equity
structure, are the dependent variables in formulas (2)
and (5) during the mediating effect testing.
Independent variables. To test the effect of the spatial
context on CSR, a spatially lagged effect of the depen-
dent variable as an explanatory variable was incorpo-
rated into the model. In terms of operational definitions,
the spatial lag value is generally obtained by multiplying
5
the spatial weight matrix by the dependent variable
(Anselin, 1988; Miller, 2004). Graph theory shows how
relations among neighboring units can be represented in
a matrix format (Anselin, 1988; Harary et al., 1965). By
introducing the spatial lag variable of CSR performance
as an independent variable, the effect of the spatial con-
text, defined as local spatial structural conditions in
terms of neighboring companies, on CSR can be effec-
tively tested and evaluated.
Another core independent variable is firm perfor-
mance. Return on assets (ROA) is a commonly used
indicator of financial performance (Godos-Dı́ez et al.,
2014). Previous studies have shown that the effect of
antecedents on CSR often has a time lag effect (Cheng &
Ding, 2020). Therefore, in addition to the current ROA
(ROA in 2018), because of possible endogenous issues,
we also use the 1-year lag of ROA (ROAFL), 2-year lag
of ROA (ROASL), and 3-year lag of ROA (ROATL) as
independent variables, separately.
Mediating Variables. Institutional investors and execu-
tive shareholders are important stakeholders in the cor-
porate governance of listed companies and play an
important role in the relationship between corporate per-
formance and CSR (Hartzell & Starks, 2003; Nofsinger
et al., 2019). In this study, the institutional and executive
shareholding ratios mediate the relationship between
CSR and ROA (Sadeghi et al., 2016).
Control Variables. Size (SIZE), assets-liabilities ratio
(ASSL), and CEO salary ratio (SALP) were the three
6 SAGE Open

Table 1. Descriptive Statistics of Variables. variable is tested; and third, the effects of the indepen-
dent and mediating variables on the dependent variable
Variable N Mean SD Min Max are tested in a single model. Moreover, because the
CSR 1,557 17.424 10.211 215.430 41.990 dependent variable may have spatial autocorrelation, the
ROA 1,557 2.744 12.179 283.981 53.824 spatially lagged value of the dependent variable is intro-
ROAFL 1,557 5.670 6.575 257.339 44.484 duced into the model as an independent variable (Gu,
ROASL 1,557 6.014 4.864 27.974 23.196 2022b). Correspondingly, the models in our study pro-
ROATL 1,557 5.825 6.962 245.381 59.989 posed to test the hypotheses when the institutional share-
INS 1,557 35.508 22.082 0 97.565
MAN 1,557 15.185 18.051 0 76.371 holding ratio is the mediating variable following Baron
SIZE 1,557 22.286 1.139 18.109 28.055 and Kenny’s (1986) three steps as follows (Test A):
ASSL 1,557 42.265 20.159 0.978 168.688
SALP 1,557 8.501 8.373 0 66.280 CSR = C + r1 W 3 CSR + a1 ROA + b1 MAN + b2 SIZE
Note. This table shows the summary statistics for the variables. It contains
+ b3 ASSL + b4 SALP + e
the number of observations, the mean values, standard deviations, and ð1Þ
min/max values of each variable in our sample. All variables are defined in
Appendix A. INS = C + r2 W 3 INS + bROA + b1 MAN + b2 SIZE
+ b3 ASSL + b4 SALP + e
control variables. All three have been commonly used as
control variables in previous CSR studies (Nofsinger ð2Þ
et al., 2019; Riedl & Smeets, 2017; Waldman & Siegel, CSR = C + rW 3 CSR + a2 ROA + gINS + b1 MAN
2008). The use of these control variables helps to compare
+ b2 SIZE + b3 ASSL + b4 SALP + e
the results of this study with those of previous studies.
Tables 1 and 2 provide summary statistics and a corre- ð3Þ
lation matrix for all the variables in our sample. When the executive shareholding ratio is the mediating
variable, the models are as follows (Test B).
Method of Analysis
CSR = C + r1 W 3 CSR + a1 ROA + b1 INS + b2 SIZE
Before performing a spatial econometric analysis, it is
+ b3 ASSL + b4 SALP + e
necessary to measure the spatial interdependence of vari-
ables (Anselin, 1988; Waldhör, 1996). The global ð4Þ
Moran’s I index was used to explain spatial correlation: MAN = C + r2 W 3 MAN + bROA + b1 INS + b2 SIZE
P
n P
n + b3 ASSL + b4 SALP + e
wij (xi  x)(xj  x)
i=1 j=1 ð5Þ
I= i = 1, 2, :::, 1557;
S2 CSR = C + rW 3 CSR + a2 ROA + gMAN + b1 INS
j = 1, 2, :::, 1557:
+ b2 SIZE + b3 ASSL + b4 SALP + e
where xi is the value of the x variable for company i and ð6Þ
n = 1557 is the total number of sample companies. wij is
an element of a spatial weight matrix. Distance affects where W is the spatial inverse distance weight matrix
CSR (Cerqueti & Ventura, 2015; Sebestyen et al., 2010). (Anselin, 1988).
Here, we adopt the inverse distance spatial weight matrix:
the larger the distance between two companies, the Results
Pn
lighter the weight. S 2 = (xi  x)2 =n is the sample var- Spatial Correlation Test
i=1
P
n
Table 3 provides the Moran’s I index for these variables.
iance and x = xi =n is the sample mean.
i=1 According to Table 3, the Moran’s I value of CSR is
To test the hypotheses, we used a hierarchical regres- 0.033 and significant, which indicates that companies’
sion following the steps established by Baron and Kenny CSR activities have a positive spatial autocorrelation.
in 1986 (Godos-Dı́ez et al., 2014; Hong et al., 2016; This shows that when neighboring companies engage in
Uwuigbe, 2011). According to this methodology, first, a CSR activities, they are often interrelated and not inde-
regression is performed to examine the effect of the inde- pendent of each other (Baron & Kenny, 1986).
pendent variable on the dependent variable; second, the Neighboring companies often engage in strategic interac-
effect of the independent variable on the mediating tions when engaging in CSR activities. This strategic
Gu 7

Table 2. Correlations Between Variables.

Variable CSR ROA ROAFL ROASL ROATL INS MAN SIZE ASSL SALP

CSR 1
ROA .72*** 1
ROAFL .41*** .36*** 1
ROASL .33*** .26*** .55*** 1
ROATL .27*** .19*** .37*** .57*** 1
INS .22*** .19*** .14*** .12*** .05 1
MAN .23*** .01 .09*** .17*** .24*** 2.59*** 1
SIZE .23*** .18*** .19*** .09*** .08*** .37*** 2.24*** 1
ASSL 2.23*** 2.24*** 2.17*** 2.21*** 2.16*** .13*** 2.22*** .44*** 1
SALP .03 2.01 .01 .03 2.01 .13*** 2.18*** .01 .02 1

Note. This table shows correlations and significance levels for the variables. All variables are defined in Appendix A.
***
p\:01.

research sample is concentrated on manufacturing com-

Table 3. Moran’s I Index of Variables.
panies. The Round 6 research sample is concentrated in
Variable Moran’s I p Value the eastern area of China. a1 , a2 , b, l, and r are the
regression coefficients in Equations 1 to 6.
CSR 0.033** .035 According to Table 4, the r value in Round 1 is posi-
ROA 0.019* .053 tive and significant, which shows that CSR has a signifi-
ROAFL 0.017* .065
ROASL 0.021* .076 cant spatial lag effect and that there is a positive mutual
ROATL 0.04** .007 influence on CSR between neighboring companies.
INS 0.055*** .001 When a company engages in CSR activities, it has a posi-
MAN 0.077*** .001 tive effect on neighboring companies and encourages
SIZE 0.057*** .001 them to follow and engage in similar CSR activities. In
ASSL 20.02* .073
SALP 0.007 .28 other words, CSR activities have a positive spatial spil-
lover effect on neighboring companies (Hong et al., 2016;
Note. This table shows Moran’s I index and significance levels for the W. Huang & Boateng, 2017). Therefore, Hypothesis 1 is
variables. Spatial inverse distance weights are used to calculate Moran’s I confirmed. According to the results of Round 6, this pos-
index. All variables are defined in Appendix A. itive spillover effect is still obvious in the eastern region;
*p\.1. **p\.05. ***p\.01.
however, it is not stable. According to the results of
Rounds 2 to 4 in Table 4, the value of r is not significant.
This shows that, when there is a time lag effect, the space
activity is the basis for the positive spatial spillover effect
lag effect may become insignificant. In addition, accord-
of CSR (Sekhar Bhattacharyya et al., 2008). In addition,
ing to the results of Round 5 in Table 4, the value of r is
Table 3 shows that some explanatory variables have spa-
not significant. This indicates that the spatial spillover
tial autocorrelation. To fully understand this relation-
effect of CSR is not obvious in the manufacturing
ship, we performed a multivariate analysis.
industry.
The purpose of implementing Rounds 2 to 4 of the
mediation effect testing is not only to see whether there
Multivariate Analysis
is a time lag effect on ROA and CSR but also to deal
We ran six rounds of mediating effect testing to properly with the issue of endogeneity. Using the lag period of
investigate and understand the relationship between firm explanatory variables to deal with endogenous problems
performance and CSR. Each round includes two groups is a common method in empirical research (Y. H. Chen
of testing: the institutional shareholding ratio (Test A) et al., 2016; W. Wang & Korschun, 2015; H. Zhang
and executive shareholding ratio (Test B) as the mediat- et al., 2016). The results in Table 4 show that, even when
ing variables. Round 1 in Table 4, composed of the ROA lags are introduced, the relationship between
Equations 1 to 6, is the basic and major testing con- ROA and CSR does not change. This indicates that this
ducted in this study. Round 2 is similar to Round 1, study’s main conclusions are reliable and robust.
except that the ROA variable is replaced by ROAFL. In The values of a1 and a2 in Table 4 are all positive
Round 3 it is replaced by ROASL, Round 4 by ROATL, and significant in all six rounds of tests. This indicates
and Round 5 was similar to Round 1, except that the that corporate performance has a positive effect on CSR.
8 SAGE Open

Table 4. Six Rounds of Mediating Effect Testing.

a1 b l a2 r Pseudo R2

Round 1
Test A .543*** .244*** .056*** .53*** .109*** .553
Test B .537*** .124*** .059***
Round 2
Test A .461*** .237*** .087*** .42*** .005 .29
Test B .448*** .431*** .065***
Round 3
Test A .47*** .808*** .088*** .398*** 2.022 .258
Test B .451*** .819*** .064***
Round 4
Test A .246*** .485*** .098*** .199*** 2.005 .244
Test B .244*** .639*** .07***
Round 5
Test A .63*** .3*** .047*** .616*** .064 .604
Test B .629*** .184*** .055***
Round 6
Test A .546*** .25*** .052*** .533*** .098** .554
Test B .539*** .114*** .05***

Note. This table compares the various models to test the mediating effect between performance and CSR. Test A uses the institutional shareholding ratio
as the mediating variable, while Test B uses the executive shareholding ratio. Further details of each model are contained in Appendix B. All variables are
defined in Appendix A
**p\.05. ***p\.01.

The better the business performance, the higher the CSR
score. This result is consistent with previous research
results (Y. H. Chen et al., 2016; W. Wang & Korschun,
2015). Therefore, Hypothesis 2 is confirmed. In addition,
this study shows that current performance is not the only
factor that has a positive effect on CSR; performance in
the lag period also affects CSR positively. The first four
rounds of inspection in Table 4 show that, in addition to
the positive effect of ROA on CSR in 2018, the ROA of
2015, 2016, and 2017 also have a positive and significant
effect on CSR in 2018; however, according to the values
of a1 and a2 of the first four rounds of tests in Table 4,
the longer the lag time, the smaller the effect of perfor-
mance on CSR.
According to the results of Test A in Table 4, all l
values are positive and significant. This result shows that
the institutional shareholding ratio has a positive effect
on CSR. Therefore, Hypothesis 3a is confirmed. All the
b values are positive and statistically significant. This
shows that firm performance has a positive effect on the
institutional shareholding ratio. Therefore, Hypothesis
3b is confirmed. Our findings are in line with those of
previous studies (Chih et al., 2010; Mamun et al., 2013;
Rodriguez-Fernandez, 2016). Because these two hypoth-
eses are true simultaneously, the following result can be
obtained: the institutional shareholding ratio mediates
the relationship between firm performance and CSR.
Therefore, Hypothesis 3 was confirmed.
According to the results of Test B in Table 4, all l val-
ues are positive and significant. This result shows that
the executive shareholding ratio has a positive effect on
CSR. Therefore, Hypothesis 4a is confirmed. All the b
values are positive and statistically significant. This
shows that firm performance has a positive effect on the
executive shareholding ratio. Therefore, Hypothesis 4b is
confirmed. Our results are consistent with those of previ-
ous studies (Battisti et al., 2022; Frias-Aceituno et al.,
2013; Koh, 2007). As these two assumptions are true
simultaneously, the following result can be obtained: the
executive shareholding ratio mediates the relationship
between firm performance and CSR. Therefore,
Hypothesis 4 is confirmed.
Discussion
Theoretical Implications
This study contributes to the literature in three ways.
First, the empirical findings are consistent with our
expectations that the spatial context affects CSR signifi-
cantly (0.109, p \ .01). Therefore, this study’s results
support the spatial context-sensitive thesis, in line with
previous studies that emphasized the importance of geo-
graphic proximity (B.-JChang & Han, 2015; K. Chang
et al., 2021; Firoozi & Keddie, 2022; Zamir & Saeed,
2020). However, in contrast to the previous view of the
spatial context-sensitive thesis, this study adds a time lag
factor and shows that the spatial and time lag effects are
interchangeable. First, CSR tends to be influenced by the
previous period’s CSR and may exhibit significant
Gu
temporal dependence. Second, influenced by geo-
graphic proximity, CSR tends to exhibit significant
spatial dependence in terms of geographic space.
Finally, the temporal and spatial dependence of CSR
often interact to form spatiotemporal dependence.
That is to say, the empirical evidence in this study not
only supports the spatial context-sensitive thesis but,
more importantly, proposes a spatiotemporal context-
sensitive thesis. Although there is evidence in the field
of innovation that the spatiotemporal context affects
enterprise behavior (Gu, 2021c, 2022e), it is still an
emerging field that is currently overlooked by the vast
majority of CSR researchers. Thus, this study not only
supports the spatial context-sensitive thesis but also
enriches its content and expands its scope.
Second, this study addresses the limitations of legisla-
tive theory. Legitimacy theory is one of the most cited
theories in the CSR field, and it also emphasizes a
context-sensitive thesis. However, legitimacy theory
emphasizes the institutional context while ignoring the
spatial one (Islam, 2016; Michelon et al., 2015). This
study shows that spatial and institutional factors explain
a company’s CSR behavior. Therefore, both the institu-
tional and spatial contexts will have an effect on a com-
pany’s CSR behavior and performance. Griesse (2007)
proposed this argument in the CSR research on Brazilian
firms; however, it has not held the attention of legitimacy
theory scholars for any length of time. This study shows
that it is imperative to incorporate spatial dependence
and seriously consider the spatial context in addition to
the institutional context when explaining corporate CSR
behavior and performance. It also illustrates some tech-
niques to take advantage of in future work.
Third, this study expands the understanding of corpo-
rate governance factors such as institutional investors
and stockholding executives in relation to CSR.
According to stakeholder theory, institutional investors
and stockholding executives are the main stakeholders
that influence corporate CSR (Fwa et al., 2020; Hong
et al., 2016; Nofsinger et al., 2019). However, in past
analyses of CSR stakeholders, institutional investors and
stockholding executives were generally used only as ante-
cedents of CSR (Al-Shammari et al., 2022; X. Chen
et al., 2021; Hartzell & Starks, 2003). The mediating
effects of these factors on corporate and CSR perfor-
mance were ignored. By introducing the spatial lag
model, this study shows that institutional and executive
shareholding ratios strengthen the relationship between
ROA and CSR performance. Thus, through a quantita-
tive study, we develop a framework that includes an
internal mechanism (mediation mechanism) and an
external mechanism (spatial spillover) to explain CSR
performance. This is a useful supplement to the stake-
holder theory of CSR.
9
Although China is a relatively young country in estab-
lishing capital markets and injecting CSR, it is rapidly
becoming a key player in the global market (Carpenter
et al., 2021). In the realm of CSR, China affects many
companies worldwide through the global supply chain
(Zhu & Lai, 2019). Although China has a relatively
unique culture and system, capital is borderless as are
the concept and practices of CSR. In addition to China,
some CSR spatial patterns exist in the United States (K.
Chang et al., 2021), Canada (Firoozi & Keddie, 2022),
and other emerging markets, including Brazil, India,
Indonesia, Korea, Malaysia, Pakistan, Russia, and
Turkey (Zamir & Saeed, 2020). Understanding the rele-
vant internal and external mechanisms of CSR determi-
nation in China will help to explain the geographic
unevenness of CSR in terms of diffusion processes in
countries around the world. More country-specific com-
parative studies are needed in this regard.
Practical Implications
The policy implications of our findings are that the
improvement in financial performance remains the objec-
tive basis for companies to adhere to social responsibil-
ity. However, when financial performance changes, listed
companies with higher levels of institutional and execu-
tive shareholding have a stronger tendency to adhere to
their social responsibility. Therefore, to improve the
social responsibility awareness of listed companies, it is
still necessary to improve their corporate governance. In
addition, this study can help companies recognize and
value the objective existence of CSR spatial spillover
effects. Our research can also provide operational sugges-
tions for companies to prevent and respond to negative
CSR spillover effects, and help guide companies to invest
more in social responsibility.
Limitations and Future Research
This study has certain limitations. First, it uses data from
companies listed on the SZSE. The average scale of the
sample companies is relatively small compared with those
listed on the SSE. Future studies should use companies
listed on the SSE to test this study’s main conclusions
and conduct comparative studies. In addition, this study
used cross-sectional data and could not test for causality.
In the future, panel data can be used to test causality.
Such applications could effectively expand the scope of
CSR research.
Conclusions
Based on a sample of 1,557 listed Chinese companies
and controlling for certain organizational characteristics,
10 SAGE Open

we analyzed whether firm performance influences CSR
practices and whether this relationship is mediated by
equity structure. The spatial context-sensitive thesis is
supported, and the mediation effects of equity structure,
such as institutional and executive shareholding ratios,
on the relationship between firm performance and CSR
performance are confirmed. These results compensate
for deficiencies in existing research and further broaden
the field of CSR research.
When advocates of spatial context-sensitive and spa-
tial context-neutral theories argue, they miss an impor-
tant point. External context has both spatial and
temporal dimensions. Because the temporal dimension
of the external context is ignored, both context-neutral
and context-sensitive theorists are static context theor-
ists. Only by revealing the temporal and spatial dimen-
sions of the external context can we dynamically
understand the effect of the external context on the
micro-subject’s behavior. This is the spatiotemporal con-
text. This study has made a very useful exploration of
this issue. Undoubtedly, it generates important theoreti-
cal, methodological, and policy implications for compa-
nies to develop CSR policies, promotional measures, and
related business strategies.

Appendix A. Variable Symbols and Definitions.

Variable symbol Variable Explanation of indicator

CSR Overall Ratings of CSR Overall Ratings of CSR from Hexun.com Social Responsibility Evaluation System in 2018
ROA Total Assets Ratio Net profit after tax/total assets in 2018
ROAFL A 1-year Lag of ROA ROA in 2017
ROASL A 2-year Lag of ROA ROA in 2016
ROATL A 3-year Lag of ROA ROA in 2015
INS Institutional Ownership Ratio of institutional ownership in 2018
MAN Executive Shareholding Ratio Executive shareholding ratio in 2018
SIZE Total Assets Total book assets (hundred million yuan) in 2018
ASSL Asset–liability Ratio Total liabilities/total assets in 2018
SALP Executive Compensation CEO compensation/total compensation of management in 2018

Appendix B manufacturing companies and in East area of China,

Additional Tests for Robustness Check
Round 1 is the basic and major test in this study. Round
2 is the same as Round 1, except that ROA variable in
Round 1 is replaced by ROAFL; in Round 3, the ROA
variable in Round 1 is replaced by ROASL; in Round 4,
the ROA variable in Round 1 is replaced by ROATL; in
Round 5, we studied the relationship between the
respectively. The numbers of observations in Rounds 5
and 6 are 1,094 and 1,162, respectively. In each round,
Model 1, Model 2, and Model 3 correspond to formula
(1), formula (2), and formula (3) and these models consti-
tute Test A. In each round, Model 4, Model 5, and
Model 3 correspond to formula (4), formula (5), and for-
mula (6) and these models constitute Test B. It is worth
noting that Model 3 in each round belongs to both Test
A and Test B.

Round 1
CSR INSHOL CSR CSR MANHOL
Variable Model 1 Model 2 Model 3 Model 4 Model 5

ROA 0.543*** (34.69) 0.244*** (6.45) 0.53*** (33.7) 0.537*** (34.07) 0.124*** (3.85)
INS 0.056*** (3.39) 0.028*** (3.2) 20.479*** (25.66)
MAN 0.022** (2.12) 20.67*** (221.18) 0.059*** (4.82)
SIZE 1.685*** (9.2) 4.631*** (10.48) 1.425*** (7.59) 1.442*** (7.62) 0.29 (0.75)
ASSL 20.08*** (27.7) 20.075*** (22.98) 20.076*** (27.35) 20.083*** (28.06) 20.119*** (25.66)
SALP 0.046** (2.15) 0.074 (1.44) 0.041** (1.97) 0.029 (1.36) 20.216*** (25.03)
_cons 219.32*** (24.93) 255.818*** (25.9) 216.186*** (24.12) 214.295*** (23.63) 31.775*** (3.95)
r .11*** (2.57) .023 (0.47) .109*** (2.58) .117*** (2.76) .161* (1.71)
obs 1,557 1,557 1,557 1,557 1,557
Wald x2 1,866.31*** 1,190.77*** 1,930.03*** 1,878.72*** 1,007.83***
Pseudo R2 .545 .433 .553 .547 .393
Wald test of 6.62*** 0.22 6.67*** 7.62*** 2.93*
spatial terms

Note. Values in parentheses are z-score statistics.

*p\.1. **p\.05. ***p\.01.
Gu 11

Round 2
CSR INSHOL CSR CSR MANHOL
Variable Model 1 Model 2 Model 3 Model 4 Model 5

ROAFL 0.461*** (12.89) 0.237*** (2.5)

0.42*** (11.66) 0.448*** (12.6) 0.431*** (7.56)
INS 0.087*** (6.62) 0.056*** (5.15) 20.48*** (27.66)
MAN 0.022** (2.12) 20.67*** (221.18) 0.065*** (4.13)
SIZE 2.82*** (12.45) 6.995*** (13.27) 2.433*** (10.32) 2.43*** (10.25) 20.044 (20.12)
ASSL 20.163*** (212.8) 20.023 (20.78) 20.155*** (212.23) 20.162*** (212.8) 20.104*** (25.14)
SALP 0.032 (1.22) 0.321*** (5.22) 0.029 (1.09) 0.015 (0.55) 20.219*** (25.17)
_cons 241.426*** (28.7) 2123.133*** (211.11) 236.957*** (27.52) 234.571*** (27.05) 36.622*** (4.65)
r .002 (0.04) 2.053 (20.89) .005 (0.09) .012 (0.23) .137 (1.48)
obs 1,557 1,557 1,557 1,557 1,557
Wald x2 575.64*** 284.86*** 635.83*** 611.99*** 1,076.89***
Pseudo R2 .27 .155 .29 .282 .409
Wald test of 0.01 0.79 0.01 0.05 2.2***
spatial terms

Note. Values in parentheses are z-score statistics.

**p\.05. ***p\.01.

Round 3
CSR INSHOL CSR CSR MANHOL
Variable Model 1 Model 2 Model 3 Model 4 Model 5

ROASL 0.47*** (9.53) 0.808*** (8.88)

0.398*** (7.99) 0.451*** (9.34) 0.819*** (11.01)
INS 0.088*** (6.52) 0.057*** (5.18) 20.486*** (228.53)
MAN 0.001 (0.12) 20.708*** (228.6) 0.064*** (3.93)
SIZE 3.25*** (14.11) 4.689*** (11.05) 2.834*** (12.01) 2.836*** (11.96) 0.035 (0.1)
ASSL 20.175*** (213.46) 20.077*** (23.2) 20.169*** (213.08) 20.174*** (213.53) 20.088*** (24.45)
SALP 0.027 (0.99) 0.044 (0.87) 0.023 (0.39) 0.009 (0.752) 20.229*** (25.53)
_cons 250.557*** (210.27) 260.109*** (26.62) 245.24*** (29.19) 243.169*** (28.77) 32.153*** (4.24)
r 2.029 (20.54) 2.015 (2.32) 2.022 (2.41) 2.017 (2.32) .082 (.9)
obs 1,557 1,557 1,557 1,557 1,557
Wald x2 486.56*** 1,254.96*** 542.35*** 521.75*** 1,181.61***
Pseudo R2 .238 .446 .258 .251 .432
Wald test of 0.29 0.1 0.17 0.1 0.81
spatial terms

Note. Values in parentheses are z-score statistics.

***p\.01.

Round 4
CSR INSHOL CSR CSR MANHOL
Variable Model 1 Model 2 Model 3 Model 4 Model 5

ROATL 0.246*** (7.06) 0.485*** (7.6)

0.199*** (5.69) 0.244*** (7.29) 0.639*** (12.67)
INS 0.098*** (7.18) 0.064*** (5.78) 20.473*** (228.23)
MAN 0.001 (0.03) 20.717*** (228.31) 0.07*** (4.21)
SIZE 3.4*** (14.64) 4.86*** (11.41) 2.926*** (12.29) 2.924*** (12.21) 20.027 (20.08)
ASSL 20.189*** (214.55) 20.097*** (24.04) 20.18*** (213.99) 20.187*** (214.53) 20.094*** (24.84)
SALP 0.037 (1.35) 0.06 (1.18) 0.032 (1.16) 0.017 (0.61) 20.213*** (25.18)
_cons 252.097*** (210.43) 261.2*** (26.69) 246.118*** (29.25) 243.67*** (28.78) 34.277*** (4.57)
r 2.01 (2.18) .002 (.05) 2.005 (2.1) .002 (.04) .126 (1.41)
obs 1,557 1,557 1,557 1,557 1,557
Wald x2 435.76*** 1218.53*** 501.64*** 478.5*** 1,245.69***
Pseudo R2 .219 .439 .244 .235 .445
Wald test of 0.29 0.01 0.01 0.01 1.98
spatial terms

Note. Values in parentheses are z-score statistics.

***p\.01.
12 SAGE Open

Round 5
CSR INSHOL CSR CSR MANHOL
Variable Model 1 Model 2 Model 3 Model 4 Model 5

ROA 0.63*** (31.86) 0.3*** (5.62)

0.616*** (30.97) 0.629*** (31.46) 0.184*** (4.04)
INS 0.047*** (4.21) 0.02*** (2.17) 20.494*** (223.65)
MAN 0.023** (2.1) 20.686*** (223.69) 0.055*** (4.17)
SIZE 1.452*** (6.96) 4.44*** (7.88) 1.244*** (5.85) 1.253*** (5.85) 0.185 (0.38)
ASSL 20.106*** (28.71) 20.087*** (22.63) 20.102*** (28.42) 20.108*** (28.91) 20.11*** (23.97)
SALP 0.02 (0.84) 0.041 (0.64) 0.018 (0.77) 0.004 (0.16) 20.259*** (24.85)
_cons 213.728*** (23.1) 250.752*** (24.24) 211.353*** (22.56) 29.457*** (22.13) 34.509*** (3.39)
r .066 (1.26) .045 (.07) .064 (1.22) .073 (1.39) .171 (1.38)
obs 1,094 1,094 1,094 1,094 1,094
Wald x2 1,625.1*** 829.45*** 1,669.11*** 1,625.82*** 734.61***
Pseudo R2 0.598 0.431 0.604 0.598 0.402
Wald test of 1.58 0.48 1.48 1.93 1.9
spatial terms

Note. Values in parentheses are z-score statistics.

**p\.05. ***p\.01.

Round 6
CSR INSHOL CSR CSR MANHOL
Variable Model 1 Model 2 Model 3 Model 4 Model 5

ROA 0.546*** (30.08) 0.25*** (5.67)

0.533*** (29.21) 0.539*** (29.47) 0.114*** (3.01)
INS 0.052*** (4.3) 0.028*** (2.8) 20.473*** (222.54)
MAN 0.016** (1.39) 20.645*** (222.6) 0.05*** (3.54)
SIZE 1.833*** (8.6) 4.685*** (9.06) 1.59*** (7.27) 1.604*** (7.29) 0.27 (0.59)
ASSL 20.078*** (26.42) 20.054* (21.84) 20.075*** (26.24) 20.081*** (26.72) 20.113*** (24.52)
SALP 0.043* (1.73) 0.107* (1.75) 0.038 (1.52) 0.026 (1.04) 20.243*** (24.69)
_cons 222.519*** (24.93) 258.364*** (25.27) 219.5*** (24.26) 217.883*** (23.9) 32.505*** (3.4)
r .098 (2.13) .015 (.29) .098** (2.16) .103** (2.25) .117 (1.17)
obs 1,162 1,162 1,162 1,162 1,162
Wald x2 1,401.6*** 855.53*** 1,442.42*** 16,414.5*** 708.43***
Pseudo R2 0.547 0.424 0.554 0.549 0.379
Wald test of 4.54 0.08 4.66 5.07 1.36
spatial terms

Note. Values in parentheses are z-score statistics.

*p\.1. **p\.05. ***p\.01.

Acknowledgments This research is funded by the National Social Science

Access to data: Jiafeng Gu had full access to all of the data in
the study and takes responsibility for the integrity of the data
and the accuracy of the data analysis.
Declaration of Conflicting Interests
The author declared no potential conflicts of interest with
respect to the research, authorship, and/or publication of this
article.
Foundation of China (17BSH122).
Ethical Statement
This research is funded by the National Social Science
Foundation of China (17BSH122). The authors declare that
they have no conflict of interest. Because the data in this
research is not collected from human subjects and is not involv-
ing Human Participants and/or Animals, EA is no needed in
this research.

Funding
The author disclosed receipt of the following financial support
ORCID iD
for the research, authorship, and/or publication of this article: Jiafeng Gu https://orcid.org/0000-0002-5904-0897
Gu
Data Availability Statement
The datasets generated and/or analyzed during the current
study are available from the corresponding author on reason-
able request.
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