24 Does CSR Materiality Affect Financial Performance in Taiwan

Journal of Financial Studies Vol. 28 No.
4 December 2020 59
Does CSR Materiality Affect Financial

Performance in Taiwan?
Chi-Jui Huang*
Department of Finance and Cooperative Management, National Taipei University
Wen-Chyan Ke **
Department of Finance and Cooperative Management, National Taipei University
Chih-Pin Lin***
Department of Business Administration, Aletheia University
Abstract *
This study explores the relationship between a firm’s performance on corporate social
responsibility (CSR) materiality and its financial performance. It develops measures for
evaluating firms’ performance on CSR materiality. Using the sample of listed firms in
Taiwan’s electronics and financial industries, this paper shows that firms rated higher in
environmental, social, and governance sustainability significantly outperform those rated
lower. Furthermore, negative sustainability behaviors have more significant impacts on firms’
financial performance than positive sustainability behaviors. Finally, the positive relationship
between financial performance and the performance on CSR materiality is more significant in
the electronics sector than in the financial sector.
Key words: Materiality, corporate governance, corporate social responsibility, CSR disclosure,
financial performance
I. Introduction
This study is the first to show that the corporate social responsibility (CSR)
index, developed in Taiwan according to the principles defined by the
* Corresponding author: Chi-Jui Huang, E-mail: crhuang@mail.ntpu.edu.tw, Professor of Department

of Finance and Cooperative Management, National Taipei University, Room 814, No. 151, University
Rd., San Shia Dist., New Taipei City 23741, Taiwan (R.O.C.), TEL: (886) 2-86715904, FAX: (886)
2-86715905.
** Wen-Chyan Ke, Associate Professor of Department of Finance and Cooperative Management, National
Taipei University, New Taipei City, Taiwan.
*** Chih-Pin Lin, Professor of Department of Business Administration Aletheia University, New Taipei
City, Taiwan.
The authors would like to thank Guest Editor Po-Hsuan Hsu and the two anonymous referees for their
constructive suggestions. Moreover, the authors gratefully acknowledge financial support from the
Ministry of Science and Technology of Taiwan (MOST 108-2410-H-305-028- and MOST 108-2410-
H-305-022-).
(The manuscript was submitted for the 2020 Special Issue on Corporate Finance: Corporate
Governance, Manager Traits, and Innovation.)
(Received: September 27, 2019; First Revision: November 14, 2019; Second Revision: March 11, 2020;
Accepted: June 2, 2020)
DOI: 10.6545/JFS.202012_28(4).0002
60 Journal of Financial Studies Vol. 28 No. 4 December 2020
Sustainability Accounting Standards Board (SASB) and applicable in both the

United States and Taiwan, is generalizable. We also establish an index to
evaluate the CSR materiality of corporations in Taiwan and verify its validity.
The results reveal that the materiality standard of the SASB could assist
managers in more efficiently making CSR decisions, and these decisions can
effectively improve financial performance because the SASB standards have
fewer measurement items (approximately 60) compared with those of others.
For example, some prevalent CSR assessments contain hundreds of items (e.g.,
the Dow Jones Sustainability Indices (DJSI) has approximately 600). Therefore,
managers can enhance financial performance through CSR effective decisions if
they can comprehend SASB materiality standards.
Recently, corporations have voluntarily or passively promoted CSR because
of entrepreneurs’ philosophies or the demands of the global supply chain and
competent governmental authorities. CSR has also become an essential concept
for industries (including corporations and their stakeholders) to understand the
environmental and social risks corporations face. From the perspective of
business strategy, promoting CSR may demand considerable costs. However, it
also brings forward benefits including enhanced reputation, brand
differentiation, social legitimacy, and productivity as well as fulfilling the
requirements of suppliers in the global supply chain (Park et al. (2015)).
To respond to internal and external environment stressors and the demands
of stakeholders and to strengthen competitiveness, corporations promote
numerous types of CSR activities and issue massive CSR information and
reports. The number of corporations that disclose sustainability information and
reports increased from fewer than 30 in the early 1990s to more than 37,000 in
mid-2020 (Khan, Serafeim, and Yoon (2016) and GRI database website 1 ).
However, researchers have reported conflicting results concerning the
relationship between the performance of CSR practices and corporate financial
performance; some have discovered a positive relationship between the two;
others, a negative relationship; still, others have claimed that no relationship
exists between the two (Orlitzky, Schmidt, and Rynes (2003) and Margolis,
Elfenbein, and Walsh (2009)). Arguably, preceding studies on the relationship
between CSR and financial performance have not reached consistent results
because most do not distinguish CSR activities with strategic materiality from
those with less materiality when evaluating CSR performance. Corporations can
invest and engage in a wide range of CSR, which is why the CSR Kinder,
Lydenberg, and Domini. Inc. (KLD) applies 124 items in assessing CSR
performance. More and more investors believe that materiality differs between
different CSR issues and that the materiality of a CSR issue differs by industry
1 See the GRI website (http://database.globalreporting.org/ (accessed August 1, 2020)).

Journal of Financial Studies Vol. 28 No. 4 December 2020 61
(Khan, Serafeim, and Yoon (2016)). For example, risk management for climate
change may be highly strategic and material for manufacturers, whereas
employee welfare and training may be more material and crucial for the service
industry. Therefore, the SASB (2018) defines CSR material issues as
sustainability issues that are essential to or likely to have a major influence on
corporate financial status or operational performance. It proposes standards for
financial performance-related CSR material issues (26 items), providing
effective resolutions in which all CSR items are no longer regarded as equally
important for every industry. However, whether the SASB standards can more
precisely measure and reflect correlations between corporate CSR involvement
and financial performance is unknown. Questions also remain regarding which
CSR behaviors are more closely related to financial performance and whether
the relationship between CSR materiality and financial performance differs by
industry.
To address this research problem, we apply the CSR materiality classification
method based on the types of industries proposed by the SASB and refer to the
environment and society rating items in the KLD CSR database. This study is the
first in Taiwan to examine CSR materiality issues. Given that assessments for
corporate governance, the primary element of CSR, must comply with the
regulations of the competent authorities in each country, we refer to the
corporate governance evaluation method to design measurement items for the
environmental, social, and governance (ESG) sustainability issues in Taiwan as
the rating criteria. Asian corporations have made considerable progress in
disclosing CSR (or ESG); as of mid-2017, 11,801 sustainability reports,
accounting for nearly 30% of all reports globally, were registered by Asian
corporations on the Global Reporting Initiative (GRI) website. According to
information released by the GRI at the end of 2015, the percentage of reports
uploaded by Taiwanese corporations to the GRI report database (14%) was second
only to U.S. corporations (15%), which demonstrates that Taiwanese corporations
actively engage in sustainability reporting and investments and compile reports
following an internationally recognized framework (CSRone (2016)).
To verify the influence of CSR material issues on corporate financial
performance, we evaluate corporate financial performance based on share price.
Furthermore, we establish a CSR materiality rating for corporations. We control
relevant cross-sectional variables of the Fama and French (1993) three-factor
model, namely the market beta value of individual stocks, corporate market
capitalizations, book-to-market ratios, the Amihud (2002) illiquidity measure,
and the variables (return on equity (ROE), return on assets (ROA), rate of R&D
expenses, and institutional investor shareholding ratios) applied in the CSR
materiality research conducted by Khan, Serafeim, and Yoon (2016). In addition,
we refer to research on the Taiwanese stock market (Ku (2005) and Chang and
Wang (2013)) and include the entire risk, turnover rate, price-to-sales ratio, and
price-to-earnings ratio of individual stock in the control variables of the
regression. The fixed effect of time and clustered standard error are controlled
and calculated to exclude the possible effect of residual autocorrelation. Through
these methods, the results overcome the interference of individual corporate
characteristics. Moreover, we evaluate corporations’ actual accounting
performance by using returns on sales, and examining CSR materiality’s
influence on accounting performance, applying the same empirical model.
Finally, tests of robustness on selection bias, the Fama-MacBeth (1973)
regression, and endogenous problems are implemented.
Empirical research is conducted on listed corporations in the electronics (79
corporations) and financial (33 corporations) industries that compiled and
released CSR reports in 2014 and 2015. The results reveal that (i) corporations
with a higher score on CSR material issues had preferable financial performance
(including share price returns and returns on sales); (ii) negative CSR material
issues (e.g., violations and sanctions received from governments) have a greater
influence on financial performance than positive CSR material issues do,
demonstrating that investors are more concerned with negative CSR issues; and
(iii) the relationship between materiality and financial performance is stronger
in the electronics than the financial industry. The results imply that the SASB
materiality standards can assist managers to make CSR decisions more
effectively, and their CSR decisions can efficiently improve financial
performance. Sample selection bias and CSR endogeneity are determined as
having limited influence on the results.
The structure of the remainder of the study is as follows: the second section,
a literature review, compiles literature concerning CSR materiality and financial
performance and conducts a gap analysis. The third section explains the
measurement of CSR materiality, data collection, and empirical methods. The
fourth section demonstrates the empirical results and the validity of data
construction. The fifth section inspects potential selection bias and endogenous
problems. The sixth and final section concludes. The appendices contain the
SASB materiality measuring method and the measurement items and rating
examples designed for the study.
II. Literature Review and Hypotheses

More and more investors are taking CSR into consideration when making
investment decisions. By 2017, more than 1,750 asset management institutions
in over 50 countries had signed the United Nations Principles for Responsible
Investment, committing to developing a more sustainable global financial
system, implementing principles for responsible investment, and understanding

and further valuing CSR material issues, such as environmental, social, and
governance concerns. The assets managed by these institutions exceeded 70
trillion USD, with 40% growth over the preceding three years.2
Corporations can invest and participate in a wide range of CSR activities,
which is why the KLD CSR database applies over 50 types of rating items to
evaluate CSR performance. Furthermore, investors have gradually come to
consider that materiality differs between different CSR issues, and that the
materiality of a CSR issue differs by industry (Khan, Serafeim, and Yoon (2016)).
Hence, we examine whether corporations with a more precise grasp of CSR
material items are favored by institutional investors, obtaining more funds and
favorable stock performance, and whether they exhibit preferable accounting
performance by comprehending key future CSR material issues.
CSR has both positive and negative definitions. Davis (1973) indicates that
corporations with positive CSR consider or response to issues beyond narrow
economic, technological, and legal requirements. McWilliams and Siegel (2001)
and Wang and Bansal (2012) both claim that corporate activities are regarded as
fulfilling their CSR when they promote social kindness, go beyond corporate
economic goals, and exceed legal requirements. By contrast, Campbell (2007)
argues that negative CSR occurs when corporations intentionally implement
decisions harmful to their stakeholders, including investors, employees,
customers, suppliers, or the environment.
Various perspectives have been shared regarding the influence of corporate
involvement in CSR on their finances. Some authors have argued that CSR
engagement increases profits, value, and stock returns, bringing benefits to
shareholders. Freeman (1984) suggests that promoting CSR helps corporations
obtain necessary resources from stakeholders (e.g., high-quality labor, customer
satisfaction and loyalty, bank funds, support of community residents) and
reduces the possibility of unlawful violations and financial fraud. Chih, Miao,
and Chuang (2014) select the Fortune Global 500 from 2002 to 2008 as a
sample (including 34 countries and 34 industries, with a total sample of 3,500
firm-years) and discover that the return on assets and net profit margin of
corporations listed on the Dow Jones Sustainability Index (DJSI) are
significantly higher than those not listed on the DJSI. Griffin and Mahon (1997)
analyze 62 studies of the relationship between corporate social and financial
performance; 33 (53%) indicate that a positive relationship exists between the
two. Waddock and Graves (1997) use S&P 500 constituent stocks as samples and
the KLD index to evaluate their CSR performance. The results reveal that CSR
performance has a positive relationship with financial performance measures
2 See the UNPRI website (https://www.unpri.org/about (accessed July 1, 2017)).

such as return on assets and net profit rate. Guiso, Sapienza, and Zingales (2015)
determine that in selected S&P 500 corporations, employees tend to believe their
senior managers trustworthy with superior performance when the managers
value employees or other material issues. Managers’ actual behavior of leading
by example and caring about employees is more essential than declarations
released by the corporations and more assistive to corporate financial
performance. Edmans (2011) states that corporations with high employee
satisfaction have favorable long-run stock returns because the capital market
does not completely reflect the positive effect of this intangible asset (i.e.,
employee satisfaction) on corporate financial performance; Edmans (2011)
discovers that it takes four years on average to fully exploit such an asset, which
implies that investors are likely to see increased returns on investments if they
can make responsible investments and identify material issues underestimated
by the capital market (e.g., employee satisfaction, corporate governance, and
environmental protection). Matsumura, Prakash, and Vera-Muñoz (2014)
disclose that corporations’ value reduced by 212,000 USD with every increase of
1,000 tons of carbon emissions; moreover, corporations that publicized their
carbon emissions have higher value than corporations that did not, with a
difference of approximately 2.3 billion USD. Corporations that pay closer
attention to environmental material issues and are willing to publish their
environmental maintenance data have higher value. Elliott et al. (2014) note that
investors assess the influence of CSR on corporation value based on sentiment:
they believe that corporations with superior CSR performance have higher
fundamental value, whereas those with inferior performance have lower
fundamental value. Walls, Berrone, and Phan (2012) collect 2,002 pieces of data
concerning S&P 500 corporations during 1997-2002 for an empirical study and
determine that superior environmental performance attracts institutional
investors and that a positive correlation exists between the two. Shan, Fu, and
Zheng (2017) reveal that U.S. corporations that promote gender equality have
higher stock returns and market evaluations; investors pay a higher price for
stocks launched by corporations with favorable CSR performance, which implies
that investor evaluations of corporations’ fundamental value are affected by their
trust that the corporation accentuates responsibilities for sustainability, and that
they are willing to purchase the stocks of such companies at a higher price.
However, CSR engagement may not be reasonably returned because it
increases cost and reduces competitiveness in fiercely competitive markets
(Jensen (2002)). Griffin and Mahon (1997) review the literature on the
relationship between CSR and corporate financial performance; nine studies
(15%) determine that a negative relationship exists between them. Wang and
Bansal (2012) imply that CSR participation have a negative influence on the
survival of new ventures. Julian and Ofori-Dankwa (2013) discover that
corporate financial performance is negatively related to a CSR activity (i.e.,

charitable donations) in Ghana. Sustainable investments by corporations may
not perform well when managers seek personal benefit (Cheng, Hong, and Shue
(2014)) or when the investment is made because of political manipulation (Di
Giuli and Kostovetsky (2014)). Other researchers have claimed that corporate
investment in CSR activities does not reflect corporations’ finances on account of
a lack of trust between corporations and stakeholders and relationships of
mutual competition and speculation (Lin, Hsiao, and Chuang (2015)).
Varying results for the relationship between CSR and financial performance
may be due to a failure to distinguish industries in terms of their levels of
materiality on CSR issues and due to regarding them as equally weighted. For
instance, Julian and Ofori-Dankwa (2013) use charitable donations as an
indicator of CSR engagement and conclude that CSR engagement is negatively
related to financial performance; however, charitable donations might not be a
material CSR activity in specific industries. Heitzman, Wasley, and Zimmerman
(2010) also suggest that neglecting the materiality of CSR disclosure in
empirical research is likely to result in false inferences and results. Indeed,
researchers could not consider CSR materiality because of a lack of guidance on
materiality.
According to the SASB definition, CSR material issues refer to perpetual
issues in industries, issues that are relatively essential to financial status, and
operational performance or that contribute to material influence. In 2015,
SASB announced a methodology for CSR materiality. At Harvard University,
Khan, Serafeim, and Yoon (2016) conduct an empirical study, based on the
SASB materiality standards, of the listed corporations in the United States,
using the U.S. KLD database. The results reveal that corporations with a higher
rating on sustainable material issues deliver favorable stock returns and
accounting performance, which accord with the 80/20 rule (i.e., the Pareto
principle), meaning that approximately 80% of the influence on many events
derive from 20% of the most important causes (Nisonger (2008)). This
substantial finding was even published in The Accounting Review, the
top-ranking journal in the field of accounting, in 2016. CSR was promoted
earlier in advanced European countries and the United States in the 1960s and
later in Asian countries. Julian and Ofori-Dankwa (2013) and Lin, Hsiao, and
Chuang (2015) discover that the CSR situation differs between corporations in
emerging or newly industrialized countries and European countries and the
United States because of differences in systems and laws. Therefore, the
present study assesses the situation in Taiwan to examine whether the
relationship between CSR materiality and financial performance in the United
States (Khan, Serafeim, and Yoon (2016)) differs from that in emerging Asian
countries, specifically Taiwan.
Empirical research conducted by Verheyden, Eccles, and Feiner (2016)

uncovers that corporations could obtain larger returns if they carefully select an
appropriate investment portfolio in the dimensions of environment, society, and
governance. Chan et al. (2020) find that that CSR mitigates the firm-specific risk
of Chinese firms. Grewal, Hauptmann, and Serafeim (2020) imply that
corporations present more credible stock information when they voluntarily
disclose more information about the CSR material issues identified by the SASB.
Grewal, Serafeim, and Yoon (2016) inspect 2,665 CSR proposals regarding
shareholder activism from 1999 to 2013 and reveal that approximately 42% of
the proposals are related to material issues and can effectively increase
corporate value; however, those unrelated to material issues do not increase
corporate value. According to the preceding analysis, Hypothesis 1 is established.
Hypothesis 1:
Corporations with higher performance in CSR material issues have higher
financial and accounting performance.
However, the research conducted by Khan, Serafeim, and Yoon (2016) only
analyzes the strengths of sustainable material issues and does not mention the
influence of negative materiality on financial performance. Moreover, whether
the results of a single country (i.e., the United States) are applicable elsewhere
remains to be verified. CSR has both positive and negative definitions. Again,
Davis (1973) suggests that corporations with positive CSR consider or respond to
issues beyond the narrow economic, technological, and legal requirements for
corporations. McWilliams and Siegel (2001) and Wang and Bansal (2012) both
argue that corporate activities fulfill CSR if they promote social kindness, go
beyond corporate economic goals, and exceed legal requirements. In contrast to
CSR (positive), corporate social irresponsibility (CSI) describes a situation
wherein a corporation is concerned only in profits, overlooks its influence on
society and the environment, and does harm to both (Kang, Germann, and
Grewal (2016)). CSI generally occurs when corporations intentionally implement
decisions harmful to stakeholders, including investors, employees, customers,
suppliers, or the global environment (Campbell (2007)).
Albrecht and Greenwald (2014) examine 14 Japanese automobile and
high-tech companies, apply two of the items in the DSJI to measure
environmental materiality, and discover that environmental material issues have
a positive influence on corporate finances. However, their results remain to be
clarified because few samples and measurement items are employed.
Ramchander, Schwebach, and Staking (2012) indicate that corporations’
inclusion in and exclusion from the constituent stocks of the Domini Social 400
Index respectively have a positive and significantly negative influence on their
share price, and such a phenomenon becomes more significant in industries with
information hoarding concerns, which shows the level of attention paid by

external supervisory authorities to negative information; investors pay close
attention to negative information about sustainable responsibility.
Concerns for material issues may have greater influence on financial
performance than strengths of material issues; investors tend to take notice of
sustainable, negative issues. Corporations may not gain approval or investment
from investors in capital markets by improving their reputation through positive
CSR activities; however, when being harmed by corporations that make mistakes
in certain negative CSR material issues or events, stakeholders, including
investors, may boycott and sell their shares as punishment. For instance, the
Volkswagen emissions scandal in 2015 resulted in a 34% plunge in share price in
two days. Länsilahti (2012) examines the joint reaction of ESG factors to
information effects and strongly approves the information effect of the three
major dimensions of CSR. Tsao, Hsueh, and Bai (2012) discover that the share
price returns of listed and over-the-counter companies in Taiwan drop when
negative ESG news events occur; moreover, among the three, the governance
factor has the greatest influence on share price returns, and governance-related
information is more likely to leak out beforehand. Responsible investors
concerned about sustainability generally exclude corporations with questionable
material CSR behavior when making investment decisions.
Three possible reasons why concerns of CSR material issues have a greater
influence on financial performance than their strengths are as follows. First,
according to the psychological principle of negative dominance, when positive
and negative events occur simultaneously, individuals tend to judge negative
events rather than making a comprehensive evaluation based on a joint
consideration of positive and negative factors (Rozin and Royzman (2001)).
Negative information is more likely to be examined and magnified than positive
information; similarly, corporations’ negative behavior is easily magnified, and
their positive information is then neglected. A negative event can destroy a
corporation’s accumulated social reputation, and for investors, the influence of
negative information is generally greater than positive information, which gives
investors an asymmetric impression of particular corporations. Groening and
Kanuri (2018) inspect investors’ reactions when a corporation releases both
positive and negative news, and the results imply that the amount of discussion
of negative information exceeds that of positive information and offsets the
influence of the positive news. Furthermore, the category-diagnosticity theory in
psychology indicates that when making judgments, individuals do not retrieve
all positive and negative information; instead, they initially retrieve negative
information that is easily memorized (Skowronski and Carlston (1987)).
Theories concerning behavioral economics also indicate that individuals have a
strong preference for negative information in both investments and daily life
events; they generally pay attention to negative information and are less
interested in positive information, presenting an irrational decision-making
process (Baumeister et al. (2001)). Lastly, when individuals make decisions, the
influence of negative information exceeds that of positive information on
account of the exaggeration of news media (Lankoski (2009)). Negative events
are more susceptible to fabrication by media and gather more attention from
investors, strengthening their negative influence (Rhee and Haunschild (2006)).
Corporations are often criticized for negatively affecting both the natural
environment and society during the process of generating profits; some
corporations choose to avoid or ignore such criticisms, whereas others respond
to critiques actively, expecting to participate in CSR to compensate for their
mistakes. However, whether CSR can amend the negative influence of
corporations remains to be clarified. The empirical research conducted by Kang,
Germann, and Grewal (2016) indicates that positive CSR promotion does little to
compensate for the influence of negative CSR. In 2014, food safety incidents in
Taiwan disclosed several edible oil manufacturer violations. Ting Hsin
International Group used gutter oil to reduce cost and increase profits, and
investor confidence in Ting Hsin collapsed when the incident was reported. Ting
Hsin could not restore its reputation even after it claimed to have donated three
billion NTD to establish a foundation. Negative CSR damages reputations and
indirectly affects sales. For instance, Nike was once attacked by U.S. human
rights groups and consumers for hiring child labor and exploiting labor; these
protests even developed into the anti-sweatshop movement and negatively
affected Nike’s total revenue when its practices were again brought up in 2002.
For most corporations, negatively substantial CSR issues can do more than harm
their reputation—they can result in company closure (Kögler (2007)). Hence,
negative CSR has a greater influence on financial performance than positive CSR
does. Jayachandran, Kalaignanam, and Eilert (2013) implement empirical
research on 3,701 pieces of data gathered over seven years concerning 518
corporations, based on the KLD database, and discover a “negativity bias”
phenomenon; specifically, concerns regarding CSR issues have more influence
on financial performance than strengths in CSR issues do, which is most
obviously reflected in economic CSR issues. Accordingly, we establish the
following hypothesis:
Hypothesis 2:
Compared with strengths in CSR material issues, concerns regarding CSR
material issues have a greater influence on financial performance.
Lastly, we address whether CSR material issues on financial performance

differ by industry (i.e., comparing the electronics and financial industries).
Different CSR material issues exist in every industry. For instance, the
electronics industry is strictly monitored by global supply chains under global

competition. Several international corporations jointly established the Electronic
Industry Citizenship Coalition (EICC),3 developed the EICC Code of Conduct by
using various instrument and methods, and now promote it to supply chains,
expecting electronics and electronics businesses to fulfill their social
responsibility, ensure safe working conditions, treat workers with respect and
fairness, and take responsibility for the environment during production. By
contrast, the financial industry does not have a similar international CSR
supervision mechanism. Unlike the electronics industry, where corporations
must fulfill international downstream suppliers (e.g., Apple or Sony)
requirements for CSR, the financial industry in Taiwan mainly relies on the
domestic market; therefore, CSR materiality has less influence on the financial
performance of the financial industry. The financial industry adopted the Equator
Principles 4 to determine, evaluate, and manage social and environmental risks
for managing project finance or a credit contraction. However, their influence is
limited as the principles are noncompulsory and complied with by only 91
financial institutions (in 37 countries), with fewer than five banks in Taiwan.
In sum, CSR material issues differ, and their levels of influence on financial
performance vary by industry. For instance, the influence of CSR materiality on
financial performance in the electronics industry may be greater than that in the
financial industry. Accordingly, the following hypothesis is established:
Hypothesis 3:
The relationship between material issues and financial performance differs
by industry, and the relationship is more significant in the electronics industry
than in the financial industry.
III. Methods
A. Definition of CSR Materiality
With the rapid development of CSR, corporations focus on the practice of

CSR and the CSR material issues that have influence and impacts on them.
Corporations are expected to grasp mid- to long-term development key points by
examining material issues and to invest limited, precious resources into the
sustainable developmental events that are most influential on them. We refer to
3 The EICC Code of Conduct has received several revisions since its initial release in 2004; version 5.0
is currently in effect. See the EICC website (http://www.eiccoalition.org/; accessed September 5,
2017).
4 The Equator Principles were formulated by the International Finance Corporation under the World
Bank and major global financial institutions. See the Equator Principles website
(http://www.equator-principles.com/; accessed September 5, 2017).
the materiality guidelines announced by the SASB and collect domestic CSR
data. SASB is an independent, nonprofit organization that aims to establish and
promote sustainability accounting standards to assist listed companies in
disclosing relevant information to meet the regulations of the U.S. Securities and
Exchange Commission (SEC). The SASB standards are specifically designed to
disclose the sustainable, material issues announced in documents that accord
with SEC regulations (e.g., annual reports). The guidelines are also recognized
by the American National Standards Institute (ANSI), which suggests that the
SASB sustainability accounting standards meet the ANSI criteria as an open,
balanced, consensual, and appropriate procedure. The SASB board is diverse,
consisting of public sector personnel, scholars, lawyers, and investors; two are
former chairmen of the SEC and the Financial Accounting Standards Board.
Although the SASB operates from the perspective of investors, issues that
other stakeholders are concerned with may overlap. For instance, sustainable
investments affect client satisfaction and loyalty, employee cohesiveness,
regulatory risk, and financial performance. Similar to the definition of
materiality of the SEC and the Public Company Accounting Oversight Board, the
SASB adopts the definition of materiality determined by the Supreme Court of
the United States, based on the Securities Act: if the disclosure of certain
information has a great chance to significantly change the comprehensive
information held by rational investors, such information has materiality.
Under the regulations of the competent authority, the CSR reports of most
corporations in Taiwan are compiled based on the GRI standards. However, the
listed assessing items of the GRI Standards are excessive and overly general
(Eccles et al. (2012)) because the users of the standards are main stakeholders of
different levels, and the standards’ assessment of materiality includes economic,
environmental, and social areas in addition to information that significantly
influences stakeholders’ evaluation and decisions. Therefore, more and more
international benchmarking companies are releasing integrated reports
following investor demands to provide them with key information that can
precisely evaluate the corporate value and long-term profitability. In integrated
reports, materiality refers to matters that substantially affect a corporation’s
ability to “create value.” Nevertheless, few corporations in Taiwan compile
integrated reports, which hinders the implementation of relevant empirical
research.
Compared with the GRI, which focuses more on multi-stakeholder
perspectives, the SASB accentuates investor viewpoints. The establishment of
the SASB report disclosure guidelines was supported by Bloomberg with
research technology, data, and analysis instruments, special teams composed of
stakeholders, and numerous parties. An independent standards council verifies
the guidelines during a public hearing. The council members are experts familiar
with guidelines formation, securities laws, environmental laws, and accounting.

The SASB convened a special team of entrepreneurs, market participants, and
other stakeholders (a third of each) to collect suggestions and feedback on the
SASB sustainability accounting standards draft. More than 2,100 experts in the
special team control a total of 21.7 trillion USD of assets and 9.7 trillion USD of
corporate output value.
The SASB conducts materiality verification from all areas, and the results are
reviewed by the special team and then the standards council. Three perspectives
are measured in materiality verification: evidence of interest, evidence of
financial impact, and forward impact adjustment. The SASB sustainability
accounting standards, accounting standards that evaluate corporations’
effectiveness in sustainable development, serve as a standard for the public to
measure corporations’ CSR-related accounting information, promote CSR
investments, and further facilitate the disclosure of CSR-related investment
information. In the SASB standards, industries are divided into 11 categories,
and each category is subdivided into smaller divisions, covering 77 industries in
total. The material issues and their evaluation methods concerning each industry
are established based on five sustainable development perspectives:
environment, social capital, human capital, business model and innovation, and
leadership and governance. See the appendices for the focuses of the guideline
formulation. By November 2018, the SASB had formulated the materiality
standards for the 11 categories (e.g., health, finance, technology and
communication, nonrenewable energy, transportation, and service).
In 2019, 23 listed companies in Taiwan were included in the constituent
stocks of the DJSI, with 12 and 7 of them being in the electronics industry and
the finance industry, respectively. Only 15 of the Taiwan corporations were
included in the top level of the DJSI World Index, and over half (8) of them were
in the electronics industry, which demonstrated that under a high level of
supervision of global supply chains and capital markets, the CSR performance of
the electronics industry and, second, the financial industry is superior to and
more internationally connected than those of the other industries. In 2014 and
2015, the electronics industry issued the most CSR reports and the financial
industry the second most, both far ahead of other industries.5 Accordingly, the
electronics and financial industries are selected as subjects for empirical
research.
B. Measurement Methods for CSR Material Issues and Their Designs
First, the SASB inspects every industry and identifies the CSR material issues
for most corporations (more than 50%) in each industry to formulate accounting
5 See http://www.csronereporting.com/news_3337 and CSRone (2016), pp. 8-9.

standards. Based on the approach of Khan, Serafeim, and Yoon (2016), we refer
to the environmental and social rating items in the U.S. KLD CSR database and
establish a set of environmental and social rating items for Taiwanese
corporations. Experts from accounting firms are involved in the process of
providing advice. Furthermore, because assessments regarding corporate
governance must accord with the competent authorities and regulations in each
country, we adopt the corporate governance evaluation items developed by the
Taiwan Stock Exchange to design items measuring materiality in governance.
Table I displays the number of positive and negative materiality items
concerning issues we compile.6
Table I
Materiality Items
P is for positive, and N for negative.
Electronics Industry Financial Industry

SASB Materiality Issues P N Total P N Total
Economics 9 4 13 27 6 33
Business Model and Innovation 1 1 2 21 1 22
Leadership and Governance 8 3 11 6 5 11
Social 20 6 26 18 9 27
Social Capital 0 1 1 2 3 5
Human Capital 20 5 25 16 6 22
Environmental 14 7 21 0 0 0
Environment 14 7 21 0 0 0
We conduct several reviews and revisions to ensure the rating items are in
line with the direction of the sustainable development of domestic corporations.
Sixty measurement items are developed for each of the electronics and financial
industries, with both positive and negative items included. The GRI G1-G4
Guidelines and the GRI standards effective in July 2018 categorize CSR into
economic, environmental, and social (EES) areas; the economic area concerns
economy, corporate governance, and product liability. Domestic listed
corporations also promote CSR according to the more generalized EES category
of the GRI Standards. To accord with international regulations, the competent
6 Because Taiwan does not have a complete CSR database similar to the U.S. KLD database, we could
not directly compare the SASB materiality items with the items in the database to calculate scores for
materiality and immateriality. Therefore, with limited research personnel, identifying material issues
is relatively practical. Thus, this study merely establishes scoring items for materiality. We appreciate
the reviewers for indicating the limitations of this study. Furthermore, this study cross-compares the
issues in the materiality matrices of the electronics and financial industries, measures the scores of
immaterial items, and conducts empirical analyses of materiality. The results reveal that immaterial
issues have an insignificant influence on corporate share price returns and returns on sales.
authority (stock exchange) has recently required certain corporations to disclose

their CSR reports based on the latest GRI standards. Surveys reveal that as of the
end of 2017, 99.8% of the CSR reports released by the 515 listed corporations
complied with the GRI standards and framework. 7 Hence, we classify CSR
materiality into EES areas according to the GRI and SASB standards (as
demonstrated in Table I). A joint review of the SASB materiality map and the
measurement items for each area indicates that economic and social issues are
more material to the financial industry and, to the electronics industry, social
and environmental issues are more material. We discover that items with
materiality accounted for approximately half the items in the KLD database (124
items), which is equivalent to the results in Khan, Serafeim, and Yoon (2016)
(where the average number of items with materiality in each industry comprised
55% of the total number of items in the KLD database).
Every predominant CSR database has research teams responsible for data
collection and review. The six research assistants in the research team of the
present study make localized interpretations of the SASB sustainable material
issues using the measurement items for corporate governance employed by KLD
and stock exchanges. They specify the possible source of each item. With the
material issues of the electronics industry, for example, the positive item of the
SASB energy management element of the environmental area is “description of
the integration of environmental considerations into strategic planning for data
center needs,” and we interpret and design the measurement item as “the
amount or ratio of income or cost savings corporations disclose because of
environmental innovations (product or process innovation).” Corporations
shown to practice the aforementioned are scored one point. We apply this
measuring method by using data retrieved from public information provided by
CSR reports, the Taiwan Economic Journal database, the websites of
governmental units (the Environmental Protection Administration, Ministry of
Labor, Fair Trade Commission, Financial Supervisory Commission, and Taiwan
Stock Exchange), the Market Observation Post System, corporate websites,
annual reports, and financial reports. The SASB standards concern actual
practices in the United States; therefore, we “localize” the questions given the
different practices in Taiwan. For instance, questions regarding the U.S.
Department of Labor practices are amended to those of the ROC Ministry of
Labor; regulations of the U.S. Environmental Protection Agency are substituted
with corresponding regulations of the ROC Environmental Protection
Administration. Appendix B provides the actual procedure, details, and
examples of coding. We refer to methods in the literature (Jizi et al. (2014)),
7 See 2017 CSRone Sustainability Report Platform and 2018 Taiwan Sustainability Reports Analysis
(https://www.csronereporting.com/).
train the researchers, and allocate two researchers for the scoring of each
corporation. They extract sample data separately, exchange them for auditing,
and discuss any doubts regarding the reliability of the data. The research team
collect relevant data according to each measurement items and determine the
strengths and weaknesses of the corporations. Corporations with or without the
strengths described in the positive items are scored one or zero point,
respectively, which serves as the addition of the materiality scoring. However,
those with or without the weaknesses described in the negative items are scored
1 or 0 point, respectively, which serves as the deduction of the materiality
scoring. See Appendix B for the investigation questions and scoring examples of
the CSR material issues.
To examine CSR material issues on corporate financial performance, we refer
to Khan, Serafeim, and Yoon (2016) and use share price returns. Given the
limitation in research personnel and data and the characteristics of the panel
regression model we adopt,8 corporations in the electronics or financial industry
that released CSR reports in both 2014 and 2015 are selected: 79 and 33
corporations in the electronics and financial industries, respectively, for a total
of 112. The industrial categories are defined by the Taiwan Stock Exchange; the
electronics industry is composed of “24: the semiconductor industry, 25: the
computer and its peripheral equipment industry, 26: the optoelectronics
industry, 27: the communication network industry, 28: the electronic
components industry, 29: the electronic channel industry, 30: the information
service industry, and 31: other electronic industries,” and the financial industry
is categorized as “17: finance.” Finally, we apply the self-constructed CSR
materiality items for scoring to assess whether the scores of CSR material issues
of each corporation influence performance in monthly share price returns (R )
from 2015 to 2016.
We divide materiality into three areas, and each area has positive and
negative questions. In the calculation of materiality scores, cross-year results
may be problematic when a simple summation method is applied to directly sum
the score of each area because additional material changes in environments and
systems (e.g., changes in domestic or nondomestic laws or regulations) on
corporate CSR practice have yearly overall (or partial) influence. To avoid this,
we refer to the standardized calculation method employed by Deng, Kang, and
Low (2013) for processing KLD scores. We calculate the mean score of the
positive and negative items of each area. For instance, the score of the positive
items of the economic area is calculated by dividing the obtained points of
positive items of the economic area at the end of the year by the total number of
8 The study demands two-year panel data. Corporations have to provide data for the two years for the
estimating panel regressions. Hence, those with single-year data are not included in the sample.
positive items for the area, with a score ranging from zero to one. Subsequently,
we subtract the mean score of the negative items of an area from the mean score
of the positive items of the area to obtain the score of the area. Finally, we
average the scores for the three areas and acquire the total score, in a range of −1
to 1, for CSR materiality.
We evaluate the influence of the total score (MAT ) and the scores of the
economic, social, and environmental areas (ECO, SOC, and ENV) of materiality on
monthly corporate share price returns (R ) and determine whether the positive
and negative items of the complete materiality and its three areas (MATP, MATN,
ECOP, ECON, SOCP, SOCN, ENVP, and ENVN) significantly influence share price
returns. The subscripted P and N of these variables indicate the mean scores of
positive and negative questions, respectively; see Table II for definitions of these
variables. Before a regression analysis, criterion validation should be made to
evaluate the effectiveness of a newly established database; specifically, to
determine whether the measurement results are valid, researchers must select
an existing and widely used method of the same type to serve as a comparison.
The results of the new and original (benchmark) methods are examined to verify
whether the correlation between the two is significant; if it is, the new method is
confirmed to have validity. In fact, Sharfman (1996) uses such a method to
inspect the validity of the renowned KLD database. In Taiwan, the corporate
CSR selection method of the CommonWealth Magazine is commonly accepted by
society (Lin, Hsiao, and Chuang (2015)) and is therefore selected as a benchmark
for correlation analyses between the CSR materiality score (MAT ) of this study
and the CSR rating of the CommonWealth CSR selection method. In Table III,
we list the scores of the positive and negative items in each CSR area and the
total materiality score (MAT ) for the two industries. Comparisons reveal that 22
of the corporations that won the CommonWealth Excellence in CSR prize in
2014 are included in the CSR materiality database constructed by this study, and
33 in 2015. The results of the correlation analyses demonstrate that the
correlation between CSR materiality score and CommonWealth CSR
performance score for the 22 prize-winning corporations in 2014 is 0.57,
representing a 1% statistical significance, whereas that for the 33 prize-winning
in 2015 is 0.735, with a 0.1% statistical significance.
Accordingly, the CSR materiality measuring variable (MAT ) developed for
this study possesses considerable validity. Furthermore, we refer to the method
adopted by Khan, Serafeim, and Yoon (2016) to evaluate the effect of CSR
materiality on share price using a capital asset pricing model (CAPM) for
monthly returns (Fama and MacBeth (1973)) and include numerous annual or
monthly control variables affecting share price, based on relevant literature
(Fama and French (1993) and Chang and Wang (2013)). According to the CAPM,
we incorporate a market beta (BETA) and apply the beta value obtained using the
year of data (from the Taiwan Economic Journal) prior to the month of
implementation as the proxy variable of BETA. We also include the natural
logarithms of the corporate market capitalization of the end of the previous
month (MV ) and the book-to-market ratio calculated at the end of the previous
year (BM ) as control variables. Moreover, considering differences in capital
markets in various countries, we also refer to Ku (2005) and Chang and Wang
(2013) and control variables such as the total risk of individual stocks (STD),
turnover rate (TURN ), sales-to-market ratio (SLMV ), and price-to-earning ratio
(PE). We also incorporate ROE, ROA, research and development intensity (RD),
and shareholding ratio of institutional investors (HOLD). We apply the mean
monthly returns of the 7 to 12 months prior to the month of implementation as
momentums (MOM ), the mean turnover rates of the previous 12 months (TURN),
the sales-to-market ratio of the income and market capitalization at the end of
the previous year (SLMV ), the price-to-earning ratio of the share price and
earnings per share at the end of the previous year as variables. The variables
ROE, ROA, RD, and HOLD for the end of the previous year are obtained from the
Taiwan Economic Journal. In addition, to control for difference between
industrial categories, we define the dummy variable of FIN and set the observed
value as one for firms in the financial industry, and that of others as zero. See
Table II for explicit definitions of the variables.9
Table II
Definitions of Variables
Variable Name Definition
Rt 1,m Monthly stock return (%) The monthly rate of return (%) after the adjustment
of interest in the month m of year t 1, where m 1,
2, …, 12 and t 2014, 2015, 2016 and 2017 in this
table. The data item is from the Taiwan Economic
Journal (TEJ).
ROSt 1 Change of returns on sales ROSt =(Income from continuing operations)/(Net
operating revenue) in the end of year t; ROSt 1=
ROSt 1–ROSt.
MATt Score of material issues MATt MATP,t ‐ MATN,t and MATt  ‐1,1 .
MATP,t Score of strength material MATP,t ECOP,t SOCP,t ENVP,t /3 and MATP,t  0,1 .
issues
MATN,t Score of concern material MATN,t ECON,t SOCN,t ENVN,t /3 and MATN  0,1 .
issues
9 To control the liquidity difference in individual stocks, we also calculate ln(AIM ), the natural
logarithm of the illiquidity ratio (ILLIQ ; Amihud (2002)) of the previous month, to serve as a control
variable, and the results are similar to the empirical results of the present study; however, the variable
is excluded as its value of variance inflation factor exceeds 10.

ECOt Score of economic ECOt ECOP,t ‐ECON,t and ECOt  ‐1,1 .
material issues
ECOP,t Score of strength economic ECOP,t (Total obtained points of strengths)/(Total
material issues questions’ number of strengths) for economic
material issues and ECOP,t  0,1 , which is evaluated
at the end of year t.
ECON,t Score of concern economic ECON,t (Total obtained points of concerns)/(Total
material issues questions’ number of concerns) for economic
material issues and ECON,t  0,1 , which is evaluated
at the end of year t .
SOCt Score of social material SOCt SOCP,t ‐SOCN,t and SOCt  ‐1,1 .
issues
SOCP,t Score of strength social SOCP,t =(Total obtained points of strengths)/(Total
material issues questions’ number of strengths) for social material
issues and SOCP,t  0,1 , which is evaluated at the
end of year t .
SOCN,t Score of concern social SOCN,t (Total obtained points of concerns)/(Total
material issues questions’ number of concerns) for social material
issues and SOCN,t  0,1 , which is evaluated at the
end of year t.
ENVt Score of environmental ENVt ENVP,t ‐ENVN,t and ENVt  ‐1,1 .
material issues
ENVP,t Score of strength ENVP,t (Total obtained points of strengths)/(Total
environmental questions’ number of strengths) for environmental
material issues material issues and ENVP,t  0,1 , which is evaluated
at the end of year t.
ENVN,t Score of concern ENVN,t (Total obtained points of concerns)/(Total
environmental questions’ number of concerns) for environmental
material issues material issues and ENVN,t  0,1 , which is evaluated
BETAt 1,m‐1 Market beta The market beta is from TEJ and calculated at the
end of the month m of year t 1 with daily trading
data in a rolling window of one year. For example,
the Beta at Nov. 30, 2015 is calculated using daily
data between Nov. 29, 2014 and Nov. 30, 2015.
Moreover, m‐1 0 denotes that the BETAt 1,0 is
calculate at the end of year t .
MVt 1, m‐1 Market values The natural logarithms of the market value, which is
in units of million NT dollar from TEJ and calculated
at the end of the month m of year t 1 as follows:
(Number of outstanding shares)(Stock price).
Similarly, m‐1 0 denotes that the MVt+1,0 is calculate
BMt Book-to-market ratio The natural logarithms of the book to market ratio,
which is calculated with the book value and the
market value at the end of year t .

MOMt 1,m‐1 Price momentum The mean of the available monthly returns of 7th to
12th months before month m. m‐1 0 denote the end
of year t .
STDt 1,m‐1 Total risk The standard deviation of daily returns in the month
m‐1 of year t 1. Moreover, m‐1 0 denote the
December of year t .
TURNt 1,m‐1 Turnover rate The mean of monthly turnover rates of 12 months
before month m of year t 1. For each month, the
turnover rate=(Monthly total trading volume)/
(Outstanding shares). Similarly, m‐1 0 denote the
December of year t .
SLMVt Sales-to-market ratio The operating revenue is divided by the market value
at the end of the year t.
PEt Price-to-earnings ratio The price is divided by the earning per share at the
end of the year t .
ROEt Return on equity (%) ROE after taxes is available from TEJ and calculated
at the end of the year t as follows:
=(Income from continuing operations)/(Average net
worth)100%
=(Income from continuing operations)/(Average
total equity)100%
ROAt Return on assets (%) ROA before interest and after taxes is available from
TEJ and calculated at the end of the year t as
follows :
=((Income from continuing operations)+(Interest
expense)(1-17%)) /(Average total assets)100%
RDt Research and development The R&D intensity is available from TEJ and
intensity calculated at the end of the year t as follows:
=(Research and development expenses)/(Gross
profit)100
HOLDt Institutional The sum of shareholding ratios for the following
shareholding ratios (%) items: domestic financial institutions, domestic trust
funds, domestic corporations, other domestic juristic
person, foreign financial institutions, foreign
corporations, and foreign trust funds, all of which
are the values at the end of the year t and from the
TEJ.
SGAt Operating expense ratios (Operating expenses)/(Operating revenues), the
values of which are at the end of the year t .
FIN Financial industry Its value equals one if a firm is belong to the
financial industry and zero else.
Table III
Mean Scores of Positive and Negative Measurement Items for
Materiality
SASB Materiality Issues Maximum Minimum Average
Panel A. Electronics Industry
Year 2014
Economics
Positive (ECOP) 1.00 0.22 0.65
Negative (ECOP) 1.00 0.00 0.15
Society
Positive (SOCP) 0.85 0.15 0.57
Negative (SOCN) 1.00 0.00 0.19
Environment
Positive (ENVP) 0.86 0.07 0.39
Negative (ENVN) 0.86 0.00 0.30
Total (MAT ) 0.75 -0.77 0.32
Year 2015
Economics
Negative (ECON) 0.25 0.00 0.17
Society
Environment
Positive (ENVP) 0.93 0.00 0.43
Negative (ENVN) 0.86 0.00 0.23
Total (MAT ) 0.89 -0.34 0.34
Panel B. Financial Industry
Year 2014
Economics
Society
Total (MAT ) 0.65 0.08 0.30
Year 2015
Economics
Positive (CEOP) 0.78 0.26 0.59
Society
Total (MAT ) 0.78 -0.12 0.30
IV. Empirical Results and Discussion
A. Influence of CSR Materiality on Share Price Return Rate
A.1. Descriptive Statistics

Table IV displays the descriptive statistics of the variables applied in
regression analyses. We collect the 2-year (24-month) stock returns data of 112
corporations; the sample size is 2,688 corporate monthly observation values. As
Table IV indicates, the mean materiality score (MAT ) of the samples is 0.320;
and the mean scores of the economic (ECO), social (SOC ), and environmental
(ENV ) areas are 0.448, 0.326, and 0.143, respectively. The sample size of the
environmental area is the valid number of samples of the electronics industry,
which the items solely concern. The scores of both positive and negative items of
each area (MATP, MATN, ECOP, ECON, SOCP, SOCN, ENVP, and ENVN) reveal that the
mean scores of the positive items are greater than those of the negative items,
implying that the corporations included in the sample have favorable
performance on CSR material issues.
Table V shows the correlation coefficient matrix of the major variables. As
Panel A in Table V suggests, stock returns (R) are positively correlated with the
scores of CSR materiality for every area (MAT, ECO, SOC, and ENV ), and the
scores of each area are highly correlated. However, the correlation between the
scores of CSR materiality and the major variables of the regression is relatively
weak, meaning that the regression variables concerning the scores of CSR
materiality for each area are less influenced by variable collinearity. Aside from
the higher correlation coefficient existing between ROE and ROA, no strong
correlations are apparent between the remaining control variables. The variance
inflation factor (VIF) is also determined to examine collinearity; the VIF values
of both ROE and ROA do not exceed 10; therefore, they are included in the
regression model to avoid regression estimation bias caused by the ignorance of
relevant variables.
A.2. Analyses of CSR Materiality: Hypothesis 1

Regression analyses are conducted to inspect the influence of materiality on
share price in Table VI. Referring to the method employed by Khan, Serafeim,
and Yoon (2016), we adopt panel regression analyses to control for the fixed
effect of time and calculate the clustered standard errors to exclude the
heterogeneity of residual variance and the possible effect of autocorrelation. As
Model 1 in Table VI indicates, without the consideration CSR materiality, the
control variables have an explanatory power of approximately 19.50% on the
monthly return of share price. In Models 1 to 5, STD is significantly positive,
Table IV
Descriptive Statistics
For the definitions of variables, please refer to Table II.
Variable Sample Size Mean S.D. Min. Max.

R 2,688 0.212 8.109 -36.570 68.085
MAT 2,688 0.320 0.201 -0.767 0.893
ECO 2,688 0.448 0.248 -0.667 1.000
SOC 2,688 0.326 0.235 -0.850 0.900
ENV 1,896 0.143 0.308 -0.857 0.929
MATP 2,688 0.548 0.136 0.145 0.902
MATN 2,688 0.228 0.115 0.000 0.952
ECOP 2,688 0.634 0.186 0.000 1.000
ECON 2,688 0.186 0.168 0.000 1.000
SOCP 2,688 0.560 0.153 0.150 0.900
SOCN 2,688 0.234 0.155 0.000 1.000
ENVP 1,896 0.408 0.165 0.000 0.929
ENVN 1,896 0.265 0.191 0.000 0.857
BETA 2,688 0.931 0.344 0.008 1.846
MV 2,688 10.424 1.524 7.264 15.402
BM 2,688 -0.203 0.599 -2.191 0.954
MOM 2,688 1.451 20.792 -103.654 128.280
STD 2,688 0.086 0.086 0.000 0.602
TURN 2,688 1.826 2.233 0.114 15.045
SLMV 2,688 11.396 15.289 -28.030 136.500
PE 2,688 9.483 12.542 -52.210 113.200
ROE 2,688 4.202 6.102 -20.520 30.560
ROA 2,688 3.202 4.551 0.000 28.710
RD 2,688 55.970 20.092 3.090 98.290
HOLD 2,688 0.216 0.190 0.018 0.722
SGA 2,688 0.295 0.456 0.000 1.000
FIN 2,688 0.212 8.109 -36.570 68.085
suggesting that higher risks in individual stocks result in higher risk premium.
However, BETA is mostly negative and statistically significant only in Model 5,
which does not accord with the expectation of the CAPM; the possible reason
may be that when the total risk is controlled, market risk (BETA), a part of total
risk, become insignificant. SLMV is significantly positive, which corresponds with
preceding reports (Ku (2005)) that a higher sales-to-market ratio leads to a
higher rate of return. ROA is also significantly positive and in line with
expectations; corporations with superior operation conditions have higher share
price returns. These results demonstrate that the regression model of share price
returns is appropriately set. Some insignificant or unexpected control variables
are retained in the models to eliminate the coefficient estimation bias resulting
from the exclusion of relevant variables.
82
Table V
Correlation Matrixes of Variables
*, **, and *** indicate the significance levels of 10%, 5% and 1%, respectively.
Panel A. The Correlation Matrix of Stock Returns and CSR Scores

MAT ECO SOC ENV
R 0.02 0.02 0.01 0.02
MAT 0.78*** 0.81*** 0.81***
ECO 0.53*** 0.40***
SOC 0.47***
Panel B. The Correlation Matrix of CSR Scores and Other Independent Variables
BETA MV BM MOM STD TURN SLMV PE ROE ROA RD HOLD SGA FIN
MAT 0.16*** 0.37*** 0.02 -0.02 0.04** 0.01 -0.03 0.06*** -0.02 -0.02 0.12*** 0.10*** -0.11*** -0.08***
ECO 0.16*** 0.22*** -0.13*** 0.01 0.11*** 0.07*** 0.02 0.05** 0.04* 0.10*** 0.17*** 0.04* -0.20*** -0.31***
SOC 0.17*** 0.25*** -0.03* 0.03 0.10*** 0.07*** 0.03* 0.10*** -0.02 -0.01 0.15*** -0.01 -0.18*** -0.18***
ENV 0.18*** 0.40*** 0.14*** -0.08*** 0.00 0.00 -0.03 0.03 -0.08*** -0.03 0.11*** 0.18*** -0.15*** -
BETA 0.15*** 0.06*** -0.07*** 0.49*** 0.44*** 0.15*** 0.11*** -0.05** -0.01 0.22*** 0.10*** -0.33*** -0.35***
MV -0.27*** 0.09*** -0.11*** -0.17*** -0.07*** -0.03 0.28*** 0.18*** -0.07*** 0.55*** 0.04** 0.13***
BM -0.24*** -0.06*** -0.03* 0.24*** -0.04** -0.58*** -0.73*** -0.27*** -0.35*** 0.15*** 0.33***
MOM -0.10*** 0.17*** -0.06*** 0.01 0.28*** 0.25*** -0.06*** 0.07*** -0.07*** -0.05**
STD 0.34*** 0.13*** 0.09*** -0.12*** 0.00 0.26*** -0.05*** -0.33*** -0.41***
TURN 0.12*** 0.11*** -0.11*** -0.01 0.22*** -0.20*** -0.36*** -0.43***
SLMV -0.01 -0.22*** -0.18*** -0.08*** -0.10*** -0.44*** -0.29***
PE 0.05*** 0.12*** 0.02 0.07*** -0.10*** -0.13***
ROE 0.83*** -0.10*** 0.41*** -0.07*** 0.01
Journal of Financial Studies Vol. 28 No. 4 December 2020
ROA 0.15*** 0.36*** -0.22*** -0.31***

RD -0.15*** -0.03 -0.45***
HOLD -0.03 0.13***
SGA 0.65***
Table VI
Regressions of Stock Return on Various CSR Materiality Issues
Dependent variable is monthly stock return, R. For the definitions of variables, please refer to Table II. In
addition, because the financial industry has no score of environmental material issues ENV, Model 5 only
uses samples from the electronics industry. The t-statistics are in parentheses. *, **, and *** indicate
two-tailed p -values less than 10%, 5%, and 1%, respectively.
Variable Model 1 Model 2 Model 3 Model 4 Model 5

Intercept 1.747 2.168 1.618 1.905 4.098
(1.47) (1.74*) (1.34) (1.56) (2.44**)
MAT 1.806
(2.35**)
ECO 1.222
(1.92*)
SOC 1.242
(2.04**)
ENV 0.945
(1.20)
BETA -0.645 -0.631 -0.645 -0.646 -1.363
(-1.35) (-1.28) (-1.33) (-1.32) (-2.54**)
MV -0.023 -0.144 -0.085 -0.096 -0.251
(-0.26) (-1.30) (-0.85) (-0.95) (-1.88*)
BM 0.060 -0.087 0.022 0.019 -0.059
(0.17) (-0.25) (0.06) (0.06) (-0.13)
MOM -0.003 -0.003 -0.003 -0.003 -0.001
(-0.27) (-0.30) (-0.28) (-0.32) (-0.10)
STD 0.600 0.605 0.608 0.597 0.807
(2.25**) (2.27**) (2.29**) (2.24**) (3.21***)
TURN -2.787 -2.621 -2.515 -2.588 -2.479
(-1.38) (-1.34) (-1.33) (-1.31) (-1.31)
SLMV 0.086 0.112 0.103 0.098 0.110
(1.86*) (2.33**) (2.22**) (2.07**) (1.94*)
PE -0.016 -0.018 -0.017 -0.018 -0.016
(-1.55) (-1.65*) (-1.56) (-1.69*) (-1.63)
ROE -0.046 -0.046 -0.049 -0.049 -0.045
(-2.26**) (-2.22**) (-2.43**) (-2.47**) (-1.92*)
ROA 0.162 0.163 0.170 0.172 0.167
(3.77***) (4.09***) (4.23***) (4.33***) (3.21***)
RD -0.053 -0.066 -0.056 -0.063 -0.033
(-1.83*) (-2.22**) (-1.90*) (-2.03**) (-0.95)
HOLD -0.008 -0.006 -0.007 -0.006 -0.003
(-1.04) (-0.82) (-0.89) (-0.73) (-0.27)
SGA -0.821 -0.419 -0.736 -0.518 -2.419
(-1.35) (-0.67) (-1.24) (-0.82) (-1.58)
FIN 0.882 0.939 1.169 0.964 -
(1.91*) (2.08**) (2.56**) (2.11**) -
Time Fixed Effect V V V V V
N 2,688 2,688 2,688 2,688 1,896
R2 19.50% 19.65% 19.61% 19.60% 23.04%
Model 2 in Table VI concerns the influence of overall CSR materiality (MAT )

on share price. Its coefficient is significant at 1.806, signifying that if
corporations score an additional 0.1 on material issues, the monthly share price
return increases by 0.1806%; thus, CSR materiality has an economic significance
for financial performance. The results verify that CSR material issues
significantly influence corporate financial performance and result in higher
share price returns, implying that CSR materiality has a significant influence on
corporate performance. The scores of materiality regarding the three areas are
assessed separately in Models 3 to 5, and the results demonstrate that economic
and social material issues have a positive influence on share price returns,
although environmental material issues have an insignificant influence on share
price. The 1,896 regression samples are collected from the electronics industry,
from which the scores for the environmental area are determined. According to
the results of Table VI, Hypothesis 1 is confirmed to be valid; that is,
corporations with higher levels of practice in CSR material issues have more
preferable financial performance (on share price returns), which corresponds
with the results of Khan, Serafeim, and Yoon (2016) concerning listed
corporations in the United States.
A.3. Analyses of the Materiality of Positive and Negative CSR Items:

Hypothesis 2
The influence of the scores of the positive and negative items of each area on
share price returns is further examined in Table VII. The results reveal that the
scores of the negative items have a significant negative influence on share price,
but those of the positive items do not exhibit a significant effect. As Table VII
discloses, the coefficients MATN (–2.991), ECON (–1.557), and SOCN (–1.492) in
Models 1, 2, and 3, respectively, are significant; the coefficient ENVN (–1.890) in
Model 4, with a t -value of 1.59 (p -value 11.29%), also approaches the edge of
the rejection region of 10% significance. These results indicate that in the stock
market in Taiwan, corporations may not gain approval from investors and
increase their financial performance or share price returns by actively promoting
CSR activities; instead, stakeholders may seriously punish corporations that
make mistakes in certain CSR material issues. Furthermore, Model 5 in Table VI
demonstrates that the overall score of the environmental area has an
insignificant influence on share price; however, the negative items in Model 4 in
Table VII imply that share price may experience some negative influence. The
results suggest that Taiwanese investors valued CSR performance in the
environmental area; investor evaluations were quickly reflected in share price,
particularly when corporations are involved in incidents of environmental
pollution (e.g., the ASE wastewater pollution incident in 2013). Based on the
analyses, Hypothesis 2 is confirmed to be valid; the concerns of CSR material
Table VII
Regressions of Stock Return on Positive and Negative CSR Materiality
Dependent variable is monthly stock return, R. For the definitions of variables, please refer to Table II. In
addition, because the financial industry has no score of environmental material issues ENV, Model 4 only
uses samples from the electronics industry. The t-statistics are in parentheses. *, **, and *** indicate
two-tailed p-values less than 10%, 5%, and 1%, respectively.
Variable Model 1 Model 2 Model 3 Model 4

Intercept 2.629 1.692 2.061 4.402
(1.99**) (1.39) (1.59) (2.55**)
MATP 0.729
(0.68)
MATN -2.991
(-2.72***)
ECOP 0.924
(1.13)
ECON -1.557
(-1.97**)
SOCP 0.954
(1.04)
SOCN -1.492
(-1.77*)
ENVP -0.317
(-0.24)
ENVN -1.890
(-1.59)
BETA -0.570 -0.604 -0.643 -1.369
(-1.14) (-1.20) (-1.31) (-2.58**)
MV -0.112 -0.073 -0.089 -0.198
(-1.03) (-0.75) (-0.86) (-1.44)
BM -0.087 0.029 0.032 -0.078
(-0.25) (0.08) (0.09) (-0.17)
MOM -0.003 -0.003 -0.003 -0.002
(-0.32) (-0.28) (-0.32) (-0.18)
STD 0.600 0.606 0.593 0.811
(2.26**) (2.28**) (2.22**) (3.20***)
TURN -2.619 -2.498 -2.613 -2.410
(-1.32) (-1.31) (-1.32) (-1.23)
SLMV 0.115 0.105 0.096 0.112
(2.46**) (2.29**) (2.04**) (2.04**)
PE -0.018 -0.017 -0.018 -0.017
(-1.73*) (-1.57) (-1.72*) (-1.66*)
ROE -0.047 -0.050 -0.049 -0.045
(-2.21**) (-2.42**) (-2.50**) (-2.02**)
ROA 0.164 0.172 0.171 0.169
(4.04***) (4.23***) (4.30***) (3.30***)
RD -0.068 -0.055 -0.063 -0.039
(-2.12**) (-1.82*) (-1.97**) (-1.11)
HOLD -0.006 -0.007 -0.006 -0.005
(-0.79) (-0.86) (-0.70) (-0.50)
SGA -0.409 -0.759 -0.530 -2.285
(-0.64) (-1.28) (-0.82) (-1.49)
FIN 0.997 1.206 0.946 -
(2.17**) (2.63***) (2.05**) -
Time Fixed Effect V V V V
N 2,688 2,688 2,688 1,896
R2 19.68% 19.62% 19.61% 23.08%
issues have relatively large influence on financial performance, which accords

with the results of Ramchander, Schwebach, and Staking (2012), who determine
that investors pay closer attention to negative than positive material information
about sustainable responsibility, and those of Tsao, Hsueh, and Bai (2012), who
reveal that negative ESG news events concerning listed corporations in Taiwan
reduce corporate share price returns.
A.4. Industry Comparison on Materiality: Hypothesis 3

The effect of materiality in the electronics and financial industries is
inspected in Tables VIII and IX. Table VIII presents the influence of CSR on
share price returns in the industries. As Panel A reveals, regarding the
electronics industry the coefficients MAT (2.116), ECO (1.389), and SOC (1.682) in
Models 1 to 3, respectively, are significant; the coefficient ENV (0.945) in Model
4 is positive but insignificant. However, the results of the regression analyses on
the financial industry are likely affected by a smaller sample size; coefficients
such as MAT, ECO, and SOC in Models 1, 2, and 3 are insignificant but positive
and lower than the coefficients obtained in the samples from the electronics
industry. These results indicate that CSR materiality has less influence in the
financial than in the electronics industry. We also apply the coefficients and
their standard errors obtained through a regression based on Panel A and
conduct a t-test10 for coefficient differences between the two sets of samples
using variables, namely MAT, ECO, and SOC, but the coefficient differences are
insignificant. Such results are possibly affected by the small sample size of the
financial industry.
Therefore, we further analyze whether a difference exists between the
industries concerning the regression results for the influence of their scores for
the positive and negative items of each CSR area on share price returns. In Panel
A of Table IX, the regression results of the electronics industry reveal that the
scores of negative items (i.e., MATN, ECON, and SOCN) have an apparent, negative
influence on share price, with coefficient ENVN being −1.890 and its t -value
−1.59, approaching statistical significance (p -value=11.29%). These results verify
that investors in the electronics industry attach great importance to CSR
material issues. By contrast, the regression results of the financial industry
suggest that ECON and SOCP have a significantly negative and positive influence
on share price, respectively. The results for SOCP may be associated with
financial corporations’ active involvement in social welfare activities to improve
their reputation, signify that investors approved of financial corporations’
involvement in CSR activities, and suggest that CSR materiality has a certain
level of influence in the financial industry.
10 Let b1 and b2 be the separate regression coefficients of the two independent samples, with their
estimated variances being Var b1 and Var b2 respectively; therefore, the t-test statistics of the
difference between the two coefficients is t b1‐b2 /sqrt Var b1 Var b2 . Under a large sample size,
we directly employ the threshold value of a standard normal distribution.
Table VIII
Regressions of Stock Return on CSR Materiality for Financial (FIN)
and Electronics (ELC) Industries
Dependent variable is monthly stock return, R. The unlisted control variables are the same as those in
Tables III and IV. For the definitions of variables, please refer to Table II. In addition, the research and
development intensity, RD, is always zero for firms in the financial industry, and thus the regression of
the financial industry does not include the control variable RD. Furthermore, because the financial
industry has no score of environmental material issues ENV, the comparison of coefficients of ENV for
Model 4 is not provided in Panel B. In Panel B, the independent sample t-test, t b1‐b2 /sqrt Var b1
Var b2 , where b1 and b2 are the regression coefficients for the financial and electronics industries,
respectively; and Var b1 as well as Var b2 are the estimated variances. The t-statistics are in parentheses.
*, **, and *** indicate two-tailed p -values less than 10%, 5%, and 1%, respectively.
Panel A. Regressions of Stock Return on CSR Materiality for Each of FIN and ELC Industries
Model 1 Model 2 Model 3 Model 4
Variable ELC FIN ELC FIN ELC FIN ELC
(1) (2) (1) (2) (1) (2) (1)
Intercept 4.092 5.264 3.321 5.206 3.910 5.389 4.098
(2.44**) (1.01) (2.05**) (0.99) (2.36**) (1.06) (2.44**)
MAT 2.116 0.991
(2.23**) (1.20)
ECO 1.389 0.525
(1.70*) (0.96)
SOC 1.682 0.598
(2.22**) (0.90)
ENV 0.945
(1.20)
Control Variables V V V V V V V
Time Fixed Effect V V V V V V V
N 1,896 792 1,896 792 1,896 792 1,896
R2 23.16% 42.28% 23.10% 42.25% 23.14% 42.25% 23.04%
Panel B. Comparisons of Coefficients of CSR Materiality between FIN and ELC Industries
Diff. in Coeff.
Variable Model 1 Model 2 Model 3
(1)-(2) (1)-(2) (1)-(2)
MAT 1.125
(0.89)
ECO 0.865
(0.88)
SOC 1.084
(1.07)
Table IX
Regressions of Stock Return on Positive and Negative CSR Materiality
for Financial (FIN) and Electronics (ELC) Industries
Dependent variable is monthly stock return, R. The unlisted control variables are the same as those in
Tables III and IV. For the definitions of variables, please refer to Table II. In addition, the research and
development intensity, RD, is always zero for firms in the financial industry, and thus the regression of
the financial industry does not include the control variable RD. Furthermore, because the financial
industry has no score of environmental material issues ENV, the comparison of coefficients of ENV for
Model 4 is not provided in Panel B. In Panel B, the independent sample t-test, t b1‐b2 /sqrt Var b1
Var b2 , where b1 and b2 are the regression coefficients for the financial and electronics industries,
respectively; and Var b1 as well as Var b2 are the estimated variances. The t-statistics are in brackets. *,
**, and *** indicate two-tailed p-values less than 10%, 5%, and 1%, respectively.
Panel A. Regressions of Stock Return on CSR Materiality for Each of FIN and ELC Industries
(1) (2) (1) (2) (1) (2) (1)
Intercept 5.493 5.477 3.550 6.574 4.556 5.162 4.402
(2.80***) (1.06) (2.15**) (1.23) (2.36**) (1.11) (2.55**)
MATP -0.188 0.604
(-0.12) (0.60)
MATN -4.915 -1.259
(-2.83***) (-1.22)
ECOP 0.987 -1.206
(1.03) (-1.53)
ECON -2.016 -1.130
(-1.70*) (-1.95*)
SOCP 0.691 1.696
(0.58) (1.67*)
SOCN -2.553 0.450
(-2.24**) (0.43)
ENVP -0.317
(-0.24)
ENVN -1.890
(-1.59)
N 1,896 792 1,896 792 1,896 792 1,896
R2 23.27% 42.29% 23.12% 42.43% 23.18% 42.37% 23.08%
Panel B. Comparisons of Coefficients of CSR materiality between FIN and ELC Industries
Diff. in Coeff.
Variable Model 1 Model 2 Model 3
(1)-(2) (1)-(2) (1)-(2)
MATP -0.792
(-0.44)
MATN -3.655
(-1.81*)
ECOP 2.193
(1.77*)
ECON -0.886
(-0.67)
SOCP -1.004
(-0.64)
SOCN -3.003
(-1.95*)
As may be observed in Panel B of Table IX, we again apply the coefficients

and their standard errors obtained through a regression based on Panel A and
implement a t-test for coefficient differences between the samples regarding
variables such as MATP, MATN, ECOP, ECON, SOCP, and SOCN. The results indicate
that the coefficient difference of MATN in the two sets of samples is –3.655(=–
4.915–(–1.259)) and significantly negative; this demonstrates that the negative
influence of the overall score of negative items (MATN) on share price is greater
in the electronics than the financial industry. Similarly, the coefficient difference
of ECOP is 2.193 and significantly positive, signifying that the positive influence
of ECOP on share price is higher in the electronics industry. The coefficient
difference of SOCN is –3.003 and significantly negative, which suggests that the
scores of negative items in the social area (SOCN) have a greater influence on
share price in the electronics industry. The preceding results again demonstrate
that CSR materiality is more influential in the electronics industry than the
financial industry because the influences of both positive and negative items in
the former are much greater than those in the latter.
The analyses suggest that CSR material issues are relatively crucial to the
electronics industry because of global competition; however, CSR materiality is
less crucial to the financial industry in Taiwan because it mainly focuses on the
domestic market. In addition, CSR was introduced earlier in the electronics than
the financial industry, and stakeholder trust of CSR involvement is accumulated
over time; hence, the influence of materiality in the electronics industry is
greater than that in the financial industry. Accordingly, Hypothesis 3 is
confirmed to be valid; the influence of CSR material issues on financial
performance differs by industry. This study is the first to examine industrial
differences in material issues; no other has discussed whether the influence of
CSR material issues on financial performance varies by industry.
B. Influence of CSR Materiality on Returns on Sales

To further verify that the higher share price returns brought by CSR
materiality result from the preferable accounting performance of a corporation
itself and are not the outcome of market investor transactions, we inspect
whether CSR materiality has a significant influence on returns on sales (ROS),
following the approach of Khan, Serafeim, and Yoon (2016). Because of sample
limitations, this study only analyzes whether the ROS of the current year
increases when corporations have a preferable performance on CSR material
issues the previous year; hence, changes in returns on sales ROS (the ROS this
year – the ROS last year) are adopted to evaluate corporate accounting
performance. We employ the same control variables as Khan, Serafeim, and
Yoon (2016) with share price returns because accounting performance is
eventually reflected in share price. We conduct panel regression analyses to
control for the fixed effect of time and calculate the clustered standard error to
assess the influence of materiality on ROS. The results are presented in Table X.
As Panel A in Table X displays, the samples apparently reduce because the
ROS in the financial statements is used as explained variables; therefore,
although the coefficient of the overall score of CSR materiality (MAT) has a
significant influence on ROS, with a coefficient of 0.040, only the social area
score has a significantly positive influence on the ROS of corporations, with a
coefficient of 0.043. This signifies that one additional point acquired in the
social area increases corporate ROS by 4.3%, and this scale of increase displays
an economic significance. Accordingly, Hypothesis 1 is confirmed, based on the
results of ROS.
Furthermore, in Panel B, subsample analyses are implemented for the
industries. The t ‐value of MAT in the subsample of the electronics industry is 1.63
(p -value =10.62%). Being at the edge of the rejection region of 10% significance,
this is regarded as significant. Therefore, it appears that in the electronics
industry, MAT and SOC have significantly positive influences on ROS. By contrast,
the MAT, ECO, and SOC in the subsample of the financial industry are positive but
insignificant, suggesting that the influence of CSR materiality on the ROS in the
financial industry is weak. The possible reason is that the shareholding ratio of
institutional investors (HOLD) replaces the effect of CSR materiality. Owing to the
emphasis placed on socially responsible investment, most institutional investors
increase their shareholding ratio in corporations with preferable CSR
performance; therefore, HOLD reflects CSR performance. Excluding the control
variables, HOLD and SGA, the untabulated regression results demonstrate that
MATN has a significantly negative influence on the ROS of the financial industry.
Accordingly, the influence of CSR material issues on ROS differs by industry, and
Hypothesis 3 is confirmed to be valid. Although the results of an additional
analysis on ROS after we exclude institutional investor shareholding tend to
support Hypothesis 2, the evidence seems slightly insufficient.11
The foregoing analyses on share price returns (R ) and returns on sales (ROS )
reveal that CSR materiality significantly and positively influences financial
performance; specifically, corporations with higher scores in the social area (SOC )
significantly increase corporate share price returns and returns on sales.
Accordingly, Hypothesis 1 is confirmed to be valid; Hypothesis 2 is also confirmed
to be valid because the influence of CSR negative material issues is stronger.
Additionally, the influence of CSR materiality on the electronics industry is higher
than on the financial industry, so Hypothesis 3 is confirmed to be valid.
11 Thanks to the advice given by the reviewers. We also apply the changes of Tobin’s Q,ROA, and ROE as
dependent variables for regression analyses, and the results are similar to those for ROS, which
indicates that MAT has a significant influence on Tobin’s Q, ROA, and ROE in the electronics industry
but an insignificant influence on those in the financial industry.
Table X
Regressions of Change of Returns on Sale on CSR Materiality
Dependent variable is the change of returns on sale, ROS. The unlisted control variables are the same as
those in Tables III and IV. For the definitions of variables, please refer to Table II. In addition, the
research and development intensity, RD, is always zero for firms in the financial industry, and thus the
regression of the financial industry does not include the control variable RD. Furthermore, because the
financial industry has no score of environmental material issues ENV, the regression of the financial
industry for ENV in Model 4 is not provided in Panel B. The t-statistics are in brackets. *, **, and ***
indicate two-tailed p-values less than 10%, 5%, and 1%, respectively.
Panel A. Regressions of Change of Returns on Sale on Various CSR Materiality Issues

Intercept 0.037 0.027 0.034 0.046
(0.94) (0.66) (0.86) (0.80)
MAT 0.040
(1.85*)
ECO 0.012
(0.65)
SOC 0.043
(1.96*)
ENV 0.019
(0.83)
Control Variables V V V V
Time Fixed Effect V V V V
N 224 224 224 158
2
R 15.52% 14.68% 16.19% 16.09%
Panel B. Regressions of Change of Returns on Sale on CSR Materiality for Each of Financial
(FIN) and Electronics (ELC) Industries
Intercept 0.046 0.632 0.031 0.630 0.049 0.647 0.046
(0.77) (2.66**) (0.50) (2.67**) (0.79) (2.73***) (0.80)
MAT 0.042 0.032
(1.63) (1.03)
ECO 0.009 0.020
(0.40) (0.84)
SOC 0.054 0.015
(2.00**) (0.54)
ENV 0.019
(0.83)
N 158 66 158 66 158 66 158
R2 16.75% 46.94% 15.77% 46.78% 18.16% 46.53% 16.09%
V. Robustness Tests
A. Sample Selection Bias

The samples of the electronics industry are limited to corporations with
issued reports. Hence, the regression results may have selection bias; the results
may merely reflect the characteristics of corporations with issued reports and are
not generalizable. Accordingly, we apply Heckman two-stage regression to
inspect the influence of potential selection bias on the regression results, which
are demonstrated in Table XI.
First, referring to Lin, Hsiao, and Chuang (2015) and Kang (2013), we
establish a probit model for the Heckman first-stage regression, using all listed
corporations in 2014 and 2015 as samples and their age of listing (AGE), returns
on assets (ROA), the logarithmic values of their total assets (log10(A)), debt ratio
(LA), the rate of advertisement fees (AD), and the dummy variables of 2015
(Y2015) as variables. The results are as displayed in Panel A in Table XI; the
pseudo R2 of the model was 37.05%, and AGE, log10(A), and AD are statistically
significant. The probit model in Panel A in Table XI is verified to fully explain
corporations’ behavior of presenting reports; therefore, we calculate the inverse
Mills ratio IMR) to use as the control variable in the original regression model to
exclude its selection bias. In Panel B in Table XI, we include IMR in the
regression of stock returns (R ) and the changes in returns on sales (ROS ). IMR
is set as zero because the samples of the financial industry do not contain
selection bias. The regression results indicate that the IMR coefficients are all
insignificant, suggesting that the influence of selection bias on the original
regression analysis is limited.
B. Fama-MacBeth Regression
To examine the CAPM, Fama and MacBeth (1973) introduce the
Fama-MacBeth regression. The method tactfully excludes the influence of the
correlation among cross-sectional residuals on the estimated standard error of
regression coefficients and is thereby commonly applied in panel data analyses
in econometrics. In the field of finance, the Fama-MacBeth regression is
commonly used in multifactor models to analyze the relationship between
cross-sectional returns and all types of risk factors. Accordingly, we apply the
Fama-MacBeth regression to analyze the influence of CSR materiality on
monthly share price returns.
Using the Fama-MacBeth regression, we perform regressions of monthly
share price returns on the CSR materiality scores and control variables month by
month and conducted t-tests with the coefficients of the 24 months; the results
are compiled in Table XII. As in Panel A of Table XII, we employ the scores of
each area of CSR materiality in the overall samples with Fama-MacBeth

regressions, and the results are equivalent to those in Table VI. The overall score
of materiality (MAT ) and the scores of the economic and social areas (ECO and
SOC ) have a significant influence on share price returns, which shows that
Hypothesis 1 is valid. As in Panel B in Table XII, a further regression on the
scores of the CSR positive and negative items is conducted, with results similar
to those in Table VII. The coefficients of the negative items of the overall,
economic, and social areas (MATN, ECON, and SOCN) show that Hypothesis 2 is
valid. As in Panel C Table XII, a Fama-MacBeth regression on the subsamples of
the electronics and financial industries is conducted, and the results indicate
that MAT, ECO, and SOC in the subsamples of the electronics industry have a
significantly positive influence on share price returns, but those of the financial
industry are insignificant, which confirms that Hypothesis 3 is valid.
These results imply that the results of the Fama-MacBeth regression and the
panel regression are equivalent, signifying that the results of the present study
are robust.
C. Endogeneity Problem
We adopt dependent and independent variables of different time periods for
regression analysis, and although this method partially reduces endogeneity
problems, it cannot entirely eliminate their influence. Therefore, this study refers
to Jiraporn et al. (2014) and applies the MAT mean of corporations with the same
3+2 postal code as the instrumental variable, named LMMAT. If no other
corporations exist in the range of a postal code, the mean MAT of the corporations
in the nearest postal area are adopted as LMMAT. Furthermore, we consider that
given the cluster of the electronics industry in Taiwan, the peer effect of
corporations in the same industry is a possible factor influencing corporate CSR
policies. Hence, by analogy with Jiraporn et al. (2014), we apply the corporate
industrial codes announced by the Taiwan Stock Exchange to calculate the mean
score of materiality (MAT ) for the other corporations in the same industry, named
IMMAT, to serve as the instrumental variable of MAT of a corporation.
Using LMMAT and IMMAT as instrumental variables, we implement
two-stage least squares (2SLS) analyses of the regression models of stock returns
(R ) in Table VI and changes in returns on sales (ROS ) in Table X. The results
demonstrate that in the 2SLS analyses, the estimated standard error of the MAT
coefficient expands, resulting in the insignificance of the MAT coefficient. That
is, we cannot directly exclude the influence of endogeneity through the 2SLS.
However, follow-up studies are expected to completely resolve concerns
regarding endogeneity either by discovering more effective instrumental
variables or by increasing the sample size to further reduce the estimated
standard error of the MAT coefficient under a 2SLS analysis.
We also discover that although the coefficients of MAT are insignificant

under 2SLS, they exceed the estimated value of OLS, and such a result
demonstrates a potential endogeneity problem that may result in an
underestimation rather than an overestimation of OLS on the importance of
MAT. This is likely because corporate financial performance worsens due to
additional costs when corporations indecently decide to improve their MAT
score. Accordingly, the effect of OLS on MAT without excluding the endogeneity
problem may be relatively conservative but still reliable.12
Table XI
Heckman Two-Stage Model
Panel A displays the probit regression only with samples from the electronics industry in the first stage of
Heckman’s approach. With the samples of 2014 to 2015, this study adopts the age of listing (AGE), the
return on assets (ROA), the logarithm of total assets (log10 A ), the debt to assets ratio (LA), the
advertising intensity (AD) and Y2015, a dummy variable of year 2015, to estimate the probability of
releasing CSR report via the probit model. Panel B shows the regression results, which adjust the
selection bias via Heckman approach. First, we use the probit model of Panel A to calculate inverse Mills
ratio (IMR ) for samples in the electronics industry as well as set IMR to zero for samples in the financial
industry; and then include the variable IMR in the regression analysis for stock return R and change of
return on sales, ROS. The t-statistics are in parentheses. *, **, and *** indicate two-tailed p-values less
than 10%, 5%, and 1%, respectively.
Panel A. The First Stage with the Probit Regression

Intercept AGE ROA log10 A LA AD Y2015 Pseudo R2
-19.702 -0.022 0.012 1.865 -0.004 4.072 0.018 37.05%
(-13.67***) (-1.92*) (1.33) (12.51***) (-0.79) (4.6***) (0.14)
Panel B. The Second Stage with the Panel Regression
Stock return, R Change of returns on sales, ROS
Variable Model 1 Model 2 Model 3 Model 4 Model 1 Model 2 Model 3 Model 4
Intercept -0.082 -0.189 -0.365 8.206 0.029 0.029 0.020 -0.002
(-0.04) (-0.10) (-0.19) (1.72*) (0.61) (0.61) (0.41) (-0.02)
MAT 1.920 0.040
(2.56**) (1.84*)
ECO 1.233 0.012
(1.96*) (0.64)
SOC 1.354 0.043
(2.25**) (1.91*)
ENV 0.892 0.020
(1.08) (0.86)
IMR 0.619 0.491 0.622 -0.827 0.002 -0.001 0.004 0.009
(1.41) (1.11) (1.39) (-0.94) (0.19) (-0.06) (0.29) (0.42)
Control Variables V V V V V V V V
Time Fixed Effect V V V V V V V V
N 2,688 2,688 2,688 1,896 224 224 224 158
R2 19.69% 19.64% 19.64% 23.07% 15.53% 14.68% 16.22% 16.14%
12 We appreciate the chief editor and anonymous reviewers providing the methods applied by Hsu et al.
(2018) and Wintoki, Linck, and Netter (2012) to resolve endogeneity, but these methods evidently
cannot exclude its influence. Therefore, we do not present or discuss the relevant results.
Table XII
Fama-MacBeth Regressions of Stock Return on CSR Materiality
Dependent variable is monthly stock return, R. The unlisted control variable are the same as those in Tables
III and IV. For the definitions of variables, please refer to Table II. The cross-sectional regressions are
conducted for each of 24 months. In addition, the research and development intensity, RD, is always zero for
firms in the financial industry, and thus the regression of the financial industry does not include the control
variable RD. Furthermore, because the financial industry has no score of environmental material issues ENV,
the regression of the financial industry for ENV in Model 4 is not provided in Panel B. The t-statistics are in
parentheses. *, **, and *** indicate two-tailed p-values less than 10%, 5%, and 1%, respectively.
Panel A. Regressions of Stock Return on CSR Materiality
Intercept 0.9382 0.3855 0.7394 2.6554
(0.46) (0.19) (0.36) (1.23)
MAT 1.6824
(2.47**)
ECO 1.0891
(2.53**)
SOC 1.4402
(2.49**)
ENV 0.7681
(1.19)
Cross-Sectional N 112 112 112 79
Avg. R2 29.36% 29.13% 29.35% 27.68%
Panel B. Regressions of Stock Return on Positive and Negative CSR Materiality
Intercept 5.493 3.550 4.556 4.402
(2.80***) (2.15**) (2.36**) (2.55**)
MATP -0.188
(-0.12)
MATN -4.915
(-2.83***)
ECOP 0.987
(1.03)
ECON -2.016
(-1.70*)
SOCP 0.691
(0.58)
SOCN -2.553
(-2.24**)
ENVP -0.317
(-0.24)
ENVN -1.890
(-1.59)
Cross-Sectional N 112 112 112 79
Avg. R2 23.27% 23.12% 23.18% 23.08%
Panel C. Regressions of Stock Return on CSR Materiality for Each of the Financial (FIN) and
Electronics (ELC) Industries
Intercept 2.7531 5.5988 2.0410 5.4621 2.6996 6.1843 2.6554
(1.24) (1.38) (0.88) (1.31) (1.19) (1.55) (1.23)
MAT 1.8487 0.1368
(2.47**) (0.18)
ECO 1.1023 0.2439
(1.91*) (0.47)
SOC 1.7927 -0.0534
(2.82***) (-0.08)
ENV 0.7681
(1.19)
Cross-Sectional N 79 33 79 33 79 33 79
Avg. R2 27.75% 23.16% 27.60% 23.10% 27.77% 23.14% 27.68%
VI. Conclusion
To examine the influence of CSR material issues on corporate financial
performance, we measure corporate financial performance by using share price
returns, refer to the CSR materiality categorization based on industry as recently
announced by the SASB, and conduct empirical research on the electronics and
financial industries with exceptional CSR performance. This study is the first to
show that the CSR measurement index developed in Taiwan according to the
SASB has explanatory power for financial performance and also provides more
empirical evidence to explain that the CSR defined by the SASB, which is
applicable in both the United States and Taiwan, has generality. The study also
establishes a measurement index to assess the CSR materiality of Taiwanese
corporations and verifies its validity. The SASB materiality standards can help
managers make CSR decisions more efficiently and ensure their CSR decisions
effectively increase financial performance, because the SASB standards have
fewer measurement items (approximately 60 items) compared with other
prevalent CSR assessments, which can contain hundreds of items (e.g., the DJSI
has approximately 600 items). Therefore, managers can enhance financial
performance through decisions on corporate governance and CSR if they can
comprehend the content of the SASB materiality standards.
The consequential findings of this study are as follows: first, CSR materiality
has a significantly positive influence on financial performance. The influence of
economic (including corporate governance) and social material issues on share
price returns is particularly salient. Additionally, social material issues can
simultaneously increase share price returns and future returns on sales. Hence,
information about CSR materiality can provide investors with highly valuable
investment information and serve as an essential reference for sustainable
investment decisions. Institutional investors can apply CSR materiality
assessments to establish a CSR portfolio or design CSR (or sustainability)-
related indices.
Furthermore, concerns regarding material issues have greater influence on
financial performance than do the strengths of material issues, implying that
investors pay closer attention to negative CSR events. The results demonstrate
that the active promotion of positive CSR activities may enhance corporate
reputation but may not be approved by investors in the capital market. However,
when being harmed by a corporation that makes mistakes in certain negative
CSR material issues or is involved in negative CSR events, stakeholders,
including investors, may boycott and sell the shares of the corporation as
punishment. For instance, foreign institutional investors, such as the German
Allianz and the U.S. Vanguard, attach great importance to CSR. Such
institutional investors generally sell shares to withdraw their funds from

corporations with poor CSR performance. In 2015, the Volkswagen emissions
scandal resulted in a 34% plunge in share price within two days. Accordingly,
investors are advised to exclude corporations with concerns of material CSR
behavior from their investment lists when making investment decisions.
Lastly, CSR materiality has a more considerable influence on the electronics
industry than the financial industry. Under global competition, the electronics
industry is strictly supervised by global supply chains. For instance, the EICC
jointly established by several international corporations applied various
instruments and methods to develop the EICC Code of Conduct and promote it
in supply chains. The EICC expects the electronics and ICT (Information &
Communications Technology) industries to fulfill social responsibility, ensure
safe working conditions, treat workers with respect and fairness, and take
responsibility for the environment during production. By contrast, the financial
industry does not have a similar international CSR supervision mechanism.
Unlike the electronics industry, where corporations must fulfill international
downstream suppliers’ (e.g., Apple and Sony) requirements for CSR, the
financial industry in Taiwan mainly relies on the domestic market; therefore,
CSR materiality has less influence on financial performance in the financial
industry. The financial industry adopted the Equator Principles to determine,
evaluate, and manage social and environmental risks for project finance or credit
contraction management. However, its influence is limited, as the principles are
noncompulsory and are only complied by 91 financial institutions (in 37
countries), and fewer than five banks in Taiwan adopted the principle.
Accordingly, the influence of CSR materiality on financial performance is greater
in the electronics industry than in the financial industry.
Currently, Taiwan does not possess a complete CSR database similar to the
U.S. KLD database, which hinders the implementation of large-scale and
long-term empirical research. Only the electronics and financial industries have
more than 30 corporations that disclosed CSR reports at least two consecutive
years. Hence, this study conducts empirical research on the electronics and
financial industries in Taiwan. The influence of CSR materiality on the
remaining industries can further be examined when more listed corporations
disclose their CSR reports in the future, which will provide more evidence
concerning the influence of CSR materiality on the market in Taiwan.
Additionally, how CSR material issues influence customer satisfaction, customer
loyalty, employee satisfaction, brand, reputation, capital availability, and capital
cost should be explored.
Appendix A. SASB Materiality

For each topic, the SASB conducts an evidence of materiality test, the results
of which are ultimately debated and reviewed by the Standards Council after
industry working groups composed of industry experts have provided their input.
The test has three components: evidence of interest, evidence of financial impact,
and forward impact adjustment. Taking the electronics and financial industries
as examples, the industrial material issues are demonstrated in Table AI.
The interest test has two components, a heat map score and an industry
working group score. The heat map score is derived from a search for relevant
keywords in documents stored on Bloomberg servers and indicates the relative
importance of the issue among the SASB’s initial list of 43 generic sustainability
issues. Evidence of interest is gathered by searching tens of thousands of
industry-related documents—Form 10-Ks, shareholder resolutions, CSR reports,
media, and SEC comment letters—for keywords related to 30 general
sustainability issues. The industry working group score signals the percentage of
industry working group members that found the issue to be material. The SASB
convenes an industry working group to provide feedback on the disclosure items
and accounting metrics identified in the initial research phase. The industry
working groups are composed of balanced representation from corporations,
market participants, and public interest intermediaries. Primary industry
working group feedback is collected via an online survey. After the conclusion of
the online survey, the SASB’s research team conducts outreach to industry
working group members to gain additional insight.
The financial impact text is based on McKinsey structure and is developed to
detect financial impact of the sustainability issues on revenue/cost,
assets/liabilities, and opportunity cost. After finishing the basic disclosure items
by industries, which are related to investors interest and financial impact, SASB
match them with current guidelines and practical operations. All matched
evidence will be published and introduced to industries.
Table AI
SASB Material and Nonmaterial Sustainability Issues in the
Electronics and Financial Industries (30 Items)
Dark color means the issue is material.
Light color means the issue is not material.
Source: Sustainability Accounting Standards Board’s (SASB) Sector-Level Materiality Map
(http://www.sasb.org/).
SASB Materiality Issues Electronics Industries Financial Industries

Environment
GHG Emissions
Air Quality
Energy Management
Fuel Management
Water and Wastewater Management
Waste and Hazardous Materials
Management
Biodiversity Impacts
Society
Social Capital
Human Rights and Community
Relations
Access and Affordability
Customer Welfare
Data Security and Customer Privacy
Fair Disclosure and Labeling
Fair Marketing and Advertising
Human Capital
Labor Relations
Fair Labor Practices
Employee Health, Safety and
Well-Being
Diversity and Inclusion
Compensation and Benefits
Recruitment, Development and
Retention
Economics
Business Model and Innovation
Lifecycle Impacts of Products and
Services
Environmental, Social Impacts on
Assets & Operations
Product Packaging
Product Quality and Safety
Leadership and Governance
Systemic Risk Management
Accident and Safety Management
Business Ethics and Transparency of
Payments
Competitive Behavior
Regulatory Capture and Political
Influence
Materials Sourcing
Supply Chain Management
Appendix B. Investigation Questions and Rating

Examples for CSR Material Issues
We design investigation questions for the electronics and financial industries
(60 questions each) and rated the selected 111 corporations. The concise
measurement items are listed in Table BI.
Table BI
Investigation Questions and Rating Examples for CSR Material Issues
Source: Sustainability Accounting Standards Board (SASB; http://www.sasb.org/).
Concise CSR Investigation

SASB CSR
SASB CSR Topics SASB Standards/Items Questions Established by
Issues
This Study
Panel A. Examples of the Electronics Industry
Environment Energy management Description of the Positive question:
integration of environmental The amount or ratio of
considerations to strategic income or cost savings
planning for data center corporations disclose
needs because of environmental
innovations (product or
process innovation)
GHG emissions Description of long-term Positive question:
and short-term strategy or Corporations’ establishment
plan to manage Scope 1 of policies related to carbon
emissions, including disclosure, carbon
emissions reduction targets, reduction, carbon
and an analysis of mitigation, or carbon
performance against those neutrality
targets
GHG emissions Gross global Scope 1 Negative question:
emissions and amount of Corporations’ negative
total emissions from influence of exhaust
Perfluoro Compounds emissions or pollutants on
(PFCs) local communities
Society Data security and Amount of legal and Negative question:
Social customer privacy regulatory fines and Corporations sanctioned by
Capital settlements associated with governments due to their
customer privacy. failure to comply with the
Disclosure shall include a Personal Data Protection
description of fines and Act while managing
settlements and corrective consumer data
actions implemented in
response to events.
Human Employee health, (1) Total Recordable Injury Positive question:
Capital safety and wellbeing Rate and; (2) Near Miss The number or ratio of
Frequency Rate for (a) full employees influenced by
time employees and (b) corporations’ disclosure of
contract employees industrial safety concerns
Table BI (Continued)
SASB CSR
Issues
This Study
Diversity and Percentage of gender and Negative question:
inclusion racial/ethnic group Corporations’ failure to
Recruitment, representation for: (1) disclose the composition of
development and executives and (2) all others their employees (e.g.,
retention gender, ethnicity, age)
according to the place of
employment (e.g., Taiwan/
China, cities, and counties)
Economics Lifecycle impacts of Percentage of eligible Positive question:
Business products and services products by revenue Products or components
Model and meeting ENERGY STAR® produced by corporations
Innovation criteria meeting the Energy Star
criteria
Lifecycle impacts of Weight of products and Negative question:
products and services e-waste recovered through Corporations’ failure to
take-back programs, formulate waste
percentage of recovered management plans and
materials that are recycled disclose relevant data about
waste recycling or disposal
Leadership Supply chain Percentage of suppliers Positive question:
and management audited in the EICC Corporations’ specifically
Governance Validated Audit Process request that suppliers
(VAP) or to an equivalent comply with the EICC Code
social and environmental of Conduct; the EICC Code
responsibility code of of Conduct concerns labor,
conduct health and safety, and
environmental standards,
elements required for an
appropriate management
system, and standards for
business ethics
Competitive behavior Amount of legal and Negative question:
regulatory fines and Corporations’ concerted
settlements associated with actions sanctioned by the
anticompetitive practices. Fair Trade Commission to
Disclosure shall include a deliberately increase
description of fines and product prices in the past
settlements and corrective three years
actions implemented in
response to events.
Panel B. Examples of the Financial Industry
Social Capital Access and Percentage of total domestic Positive question:
affordability loans for underserved and Corporations launch
underbanked business microcredit loans,
segments providing microfinance
services
Data security and Number of data security Negative question:
customer privacy breaches and percentage Corporations are sanctioned
involving customers’ by governments due to their
personally identifiable failure to comply with the
information. Disclosure Personal Data Protection
shall include a description Act while managing
of corrective actions. consumer data
Table BI (Continued)
SASB CSR
Issues
This Study
Human Diversity and Compensation and benefits Positive question:
Capital inclusion Percentage of total Corporations disclose the
compensation that is salaries and remuneration
variable for: (1) executives of their board members,
and; (2) all others supervisors (or the audit
committee), and general
managers
Diversity and Percentage of gender and Negative question:
inclusion racial/ethnic group Corporations fail to disclose
representation for: (1) the composition of their
executives and; (2) all others employees (e.g., gender,
ethnicity, and age).
Business Lifecycle impacts of Discussion of how Positive question:
Model and products and services environmental, social, and 1. Corporations take
Innovation governance (ESG) factors environmental, social,
are integrated into the and corporate
lending process governmental factors into
account when making
loan credit decisions and
during the loan process
2. Corporations sign the
Equator Principles
Environmental, social Discussion of credit risk to Positive question:
impacts on assets & the loan portfolio presented Corporations include
operations by climate change, natural climate change or other
resource constraints, human environmental risks in
rights concerns, or other assessment when practicing
broad sustainability trends real estate mortgage and
underwriting.
Negative question:
Corporations fail to
formulate quantifiable or
reduction goals for their
climate change policies.
Leadership Business ethics and Number of inquiries, Positive question:
and transparency of complaints, or issues The corporate internal
Governance payments received by the legal and auditors factually disclose
compliance office through deficient and abnormal
an internal monitoring or events discovered during
reporting system, and inspection in the audit
percentage that were reports and track them.
substantiated.
Competitive behavior Amount of legal and Negative question:
regulatory fines and Corporate chairs, managers,
settlements associated with or employees have been
fraud, anti-trust, prosecuted for violating the
anti-competitive, market Securities and Exchange
manipulation, malpractice Act, the Company Act, the
or other business ethics Banking Act, the Financial
violations. Holding Company Act, the
Business Entity Accounting
Act or have engaged in
corruption, malfeasance,
fraud, breach of trust, or
criminal conversion.
This study is complied with these measuring methods using data retrieved
from public information provided by CSR reports, the TEJ database, the
websites of governmental units (Environmental Protection Administration,
Ministry of Labor, Fair Trade Commission, Financial Supervisory Commission,
and Taiwan Stock Exchange), the Market Observation Post System, corporate
websites, annual reports, and financial reports. The SASB standards concern
actual practices in the United States; therefore, this study “localizes” the
questions given practices in Taiwan. For instance, questions regarding the U.S.
Department of Labor practices are amended to those of the Taiwan Ministry of
Labor. Regulations of the U.S. Environmental Protection Agency are substituted
with the corresponding Taiwan regulations of the Environmental Protection
Administration.
However, data for details concerning items, based on the disclosed CSR
reports, are difficult to obtain. Many corporations merely disclosed that they
formulated policies for carbon disclosure, carbon mitigation, or carbon
neutrality in their CSR disclosure reports, but we could not acquire details (such
as operating regulations) of these policies and evaluate their quality. Even
though each item is rated yes or no (e.g., 0, 1), the sums of the 60 items
approach a continuous normal distribution. The items are developed based on
SASB materiality accounting standards. La Porta et al. (1998) and Djankov et al.
(2008) also employ such an approach to examine whether the laws of 72 selected
countries contain particular provisions that protect minority shareholders (0 or
1); the sums of items are employed to establish an anti-director index and
anti-self-dealing index for each country. Furthermore, Djankov, McLiesh, and
Shleifer (2007) apply a similar method to construct a creditor rights index that
measures the level of protection of laws for creditors in 129 countries.
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臺灣企業社會責任之重大性議題會影響公司財務績效嗎？
黃啟瑞*
國立臺北大學金融與合作經營學系
柯文乾**
國立臺北大學金融與合作經營學系
林志斌***
真理大學企業管理學系
摘要
本研究探討企業社會責任 (CSR)重大性議題表現與財務績效之關係。本文建置指標衡量
CSR 重大性議題。以臺灣電子及金融業上市公司實證發現，在環境、社會和治理等重大性議題
評等越高，其財務績效也越優異。相對於正面永續性行為，負面永續性行為對財務績效的影響
更大。最後，CSR 重大性議題對財務績效之影響，電子業比金融業更顯著。
關鍵詞：重大性、公司治理、企業社會責任、企業社會責任揭露、財務績效
* 通訊作者：黃啟瑞，E-mail: crhuang@mail.ntpu.edu.tw，國立臺北大學金融與合作經營學系教授，23741
新北市三峽區大學路 151 號，電話：(886) 2-86715904，傳真：(886) 2-86715905。
** 柯文乾，國立臺北大學金融與合作經營學系副教授。
*** 林志斌，真理大學企業管理學系教授。
作者感謝客座主編許博炫教授及兩位匿名審查委員提供的審查意見。此外，作者也感謝臺灣科技部專題
計畫之補助 (MOST 108-2410-H-305-028- 及 MOST 108-2410-H-305-022-)。

24 Does CSR Materiality Affect Financial Performance in Taiwan

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24 Does CSR Materiality Affect Financial Performance in Taiwan

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Journal of Financial Studies Vol. 28 No.

Does CSR Materiality Affect Financial

* Corresponding author: Chi-Jui Huang, E-mail: crhuang@mail.ntpu.edu.tw, Professor of Department

Sustainability Accounting Standards Board (SASB) and applicable in both the

1 See the GRI website (http://database.globalreporting.org/ (accessed August 1, 2020)).

II. Literature Review and Hypotheses

system, implementing principles for responsible investment, and understanding

2 See the UNPRI website (https://www.unpri.org/about (accessed July 1, 2017)).

corporate financial performance is negatively related to a CSR activity (i.e.,

Empirical research conducted by Verheyden, Eccles, and Feiner (2016)

information hoarding concerns, which shows the level of attention paid by

Lastly, we address whether CSR material issues on financial performance

electronics industry is strictly monitored by global supply chains under global

A. Definition of CSR Materiality

With the rapid development of CSR, corporations focus on the practice of

with guidelines formation, securities laws, environmental laws, and accounting.

B. Measurement Methods for CSR Material Issues and Their Designs

5 See http://www.csronereporting.com/news_3337 and CSRone (2016), pp. 8-9.

Electronics Industry Financial Industry

authority (stock exchange) has recently required certain corporations to disclose

Variable Name Definition

Variable Name Definition

IV. Empirical Results and Discussion

A. Influence of CSR Materiality on Share Price Return Rate

A.1. Descriptive Statistics

A.2. Analyses of CSR Materiality: Hypothesis 1

Variable Sample Size Mean S.D. Min. Max.

Panel A. The Correlation Matrix of Stock Returns and CSR Scores

ROA 0.15*** 0.36*** -0.22*** -0.31***

Variable Model 1 Model 2 Model 3 Model 4 Model 5

Model 2 in Table VI concerns the influence of overall CSR materiality (MAT )

A.3. Analyses of the Materiality of Positive and Negative CSR Items:

Variable Model 1 Model 2 Model 3 Model 4

issues have relatively large influence on financial performance, which accords

A.4. Industry Comparison on Materiality: Hypothesis 3

As may be observed in Panel B of Table IX, we again apply the coefficients

B. Influence of CSR Materiality on Returns on Sales

Panel A. Regressions of Change of Returns on Sale on Various CSR Materiality Issues

A. Sample Selection Bias

each area of CSR materiality in the overall samples with Fama-MacBeth

We also discover that although the coefficients of MAT are insignificant

Panel A. The First Stage with the Probit Regression

institutional investors generally sell shares to withdraw their funds from

Appendix A. SASB Materiality

SASB Materiality Issues Electronics Industries Financial Industries

Appendix B. Investigation Questions and Rating

Concise CSR Investigation

Albrecht, Patrick, and Christopher Greenwald, 2014, Financial materiality of

McWilliams, Abagail, and Donald Siegel, 2001, Corporate social responsibility: A

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ROA 0.15* 0.36* -0.22* -0.31*