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Edited by James R. Barth, Chen Lin and Clas Wihlborg
Chapter 25: Corporate Social Responsibility, Financial Performance and Selection Bias: Evidence from Taiwan’s TWSE-listed Banks
Chung-Hua Shen and Yuan Chang 25.1 INTRODUCTION The worldwide surge in corporate social responsibility (CSR) shows that companies are becoming increasingly worried about the impact of their business activities on society.1 More and more firms highlight their CSR activities, which aim to balance their business operations with the concerns of external stakeholders such as customers, unions, local communities, non-governmental organizations (NGOs) and governments. Thus, although generating profits is important, the social and environmental consequences of operations are also weighed against economic gains. Corporate governance and CSR are both extraordinarily important to a corporation. This is because corporate governance involves a set of processes, customs, policies, laws and institutions which affect the way in which a company is directed, administered or controlled. It also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders, the management and the board of directors, and other stakeholders include employees, customers, creditors, suppliers, regulators and the community at large. Thus, companies with well-formed corporate governance systems take care of most CSR issues. CSR is not separate from corporate governance. For example, good corporate governance is basically concerned with making better decisions for the long-term health of the company, such as enhancing the brand value of a company. Taking care of CSR is like taking care of risk management, where the risk is related to the value of a company brand. The 2008 Chinese milk scandal is a notable example.2 Taking care of...
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