The Effect of Financial Ratios of Listed Companies on Corporate Value in China: Focused on the Moderating Effect of Corporate Social Responsibility

Abstract

This study analyzed the effect of financial ratio and corporate social responsibility(CSR) on corporate value for listed companies in China, respectively, and further analyzed whether CSR have additional moderating effects in the relationship between financial ratio and corporate value. The financial ratios used in this study were profitability(net return on equity capital) and growth potential(sales growth rate), and corporate value was measured using the Tobin－Q value. Whether the CSR activities of the listed company are evaluated and disclosed in RKS was used as a CSR measurement variable, and additional analysis was conducted using the CSR evaluation score as a measurement variable because the CSR score could affect corporate value. The sample used in this study consisted of 14,566 company－year samples for companies listed on the China Shanghai Stock Exchange and Shenzhen Stock Exchange A stock market for six years from 2013 to 2018. The analysis results of this study are summarized as follows. First, both the sales growth rate and the net return on equity capital showed a statistically significant positive relationship with corporate value. Second, the social responsibility activity variable also showed a significant positive relationship with corporate value. Third, it was found that the financial ratio and CSR interaction variables had statistically significant positive values. Fourth, an additional analysis of only companies with CSR evaluation scores showed that both the financial ratio and CSR have a significant positive effect on corporate value, respectively. However, both financial ratio and CSR interaction variables were not statistically significant, indicating that the CSR evaluation score did not have a moderating effect on the relationship between financial ratio and corporate value.