The Impact of Management Succession on Corporate Social Responsibility of Chinese Family Firms: The Moderating Effects of Managerial Economic Motivations

Abstract

Because the establishment of private enterprises has been allowed by the Chinese government since the 1980s, management successions have occurred in a large number of Chinese family firms in recent years. Grounded in upper echelons theory and considering the generational differences between founders and successors, it is expected that the initiation of a within-family succession will lead to significant changes in firms’ CSR strategies. Applying the difference-in-difference method, the results suggest that family firms having initiated successions have better CSR performance relative to those that have not initiated successions and succession firms prior to the initiation of successions. The paper further finds that not all post-succession family firms demonstrate homogeneity in terms of CSR. The impact of succession on firms’ CSR is more pronounced for succession family firms with debt financing plans and politically connected successors. This paper contributes to the manager-effect literature, family firm CSR research and management succession studies, and it is also useful to policy makers of Chinese government.

1. Introduction

In recent years, corporate social responsibility (CSR) has attracted considerable attention from both academia and the business world around the globe. China, the world’s largest emerging economy, has also increasingly engaged in CSR. However, due to the lack of regulation and a focus on profits, firms lack incentives to implement CSR strategies. As a result, the government takes actions to encourage firms to engage in CSR activities. Chinese private enterprises, which contribute more than 60% to the national GDP in recent years, play an important role in Chinese economic development [1]. Among the more than 300 million Chinese private enterprises, at least 90% are family firms [1]. Given the important role of family business in China’s economy and its significant societal power, family firms’ implementation of CSR is vital to the whole society.

Upper echelons theory suggests executives have significant influence on corporates’ strategic decisions [2]. Originating from the theory, one stream of literature examines how managers’ personal attributes affect firms’ CSR. Indeed, much research has documented that management characteristics (e.g., social status, career horizon and ability) significantly impact on the CSR performance of firms [3,4,5]. Because the establishment of private enterprises has been allowed by the Chinese government since the 1980s, family firms’ succession issues have become salient in recent years. The government has been encouraging private entrepreneurs to assume social responsibilities by cultivating competent and socially responsible successors for the sustainable development of socialist economy [6]. Some anecdotal evidence suggests that due to the different personal values and cognitive styles between the first and second generation owners of Chinese family firms, their strategic choices regarding CSR differ [7]. However, until now the effects of management succession of Chinese family firms on CSR has been largely ignored by academic research. Therefore, this paper casts light on the impact of succession on family firms’ CSR performance, and the moderating effects of managerial economic motivations on the association between succession and CSR.

China provides an ideal and interesting environment to study the impact of management succession on the CSR of family firms. First, different from most developed countries, there is a dynamic intuitional environment in China in terms of private enterprises. The Chinese government policies and legal institutions regarding private entrepreneurs have gone through stages of prohibition, tolerance, accommodation and encouragement over the last seven decades. Accordingly, private firm owners’ social status and their personal cognitions of the environment have changed dramatically. It is expected that the significant differences in the characteristics of the first and second generations may generate different CSR behavior, and this study provides results that may differ from related research carried out in developed countries.

Second, as an emerging country, the institutional environment and corporate governance are weak in China. Entrepreneurs play an especially important role in the management of family firms, and thus the impact of their characteristics on corporate operation is stronger relative to that in developed countries. Hence, it is appropriate to study the influence of family firm owners’ intergenerational differences on firms’ CSR.

This study examines the impact of management succession on Chinese family firms’ CSR. Two research questions are tested. The first is whether family firm succession influences firms’ CSR behavior. The second is whether management economic motivations moderate the association between succession and CSR.

Using a sample of Chinese family firms from 2009 to 2018, this study first finds that relative to family firms that have not initiated successions and succession firms prior to their initiation of successions, family firms which have initiated successions have better CSR performance. The result further suggests that the relationship between succession and CSR is more pronounced for succession family firms with debt financing plans and politically connected successors.

The results should be of interest to policy makers of Chinese government, who have been encouraging the second generation of private enterprises to assume social responsibilities and contribute to the Construction of a Harmonious Society [8]. The results indicate that as encouraged by the government, successors tend to actively engage in CSR activities.

This study contributes to three broad research streams. First, it builds upon and extends manager-effect literature. Originating from upper echelons theory [2], many researchers examine how managers’ personal attributes influence firms’ operational and financing decisions. For example, Bamber et al. (2010) explore the impact of managers’ demographic characteristics on their financial disclosure styles [9]. Dyreng et al. (2010) find individual executives play a significant role in determining the level of firms’ tax avoidance [10]. Furthermore, CSR research finds CEOs’ social status [3], career horizon [4], narcissism [11], ability [5], gender and education [12] significantly impact firms’ CSR performance. The personal values and cognitive styles of the first and second generation owners of Chinese family firms differ apparently due to historical reasons, and so firms’ management succession is expected to significantly influence corporate CSR strategies. Therefore, this study links management succession with CSR by exploring the relationship between family firm owners’ intergenerational differences and corporate operations.

Second, this study adds to family firm CSR research. Most family firm CSR studies focus on how and why family firms’ CSR strategies differ from non-family firms [13,14,15]. According to upper echelons theory [2], it is expected that management succession may significantly influence firms’ CSR strategies. However, current CSR research has neglected the potential link between succession and CSR. By focusing on the association between succession and CSR, this study may provide a new research perspective for family firm CSR research.

Third, this study enriches research on management succession of family firms. Most studies of family firm succession focus on the impact of generational succession on firms’ financial performance, and the findings are inconclusive. Most studies document the negative impact of interfamily succession on firms’ financial performance [16,17,18], while some find management succession leads to better financial performance [19,20]. Except for financial performance, CSR has also attracted more and more attention from stakeholders. However, there is scarce research on how CSR engagement is affected by management succession. This study explores the influence of family firm succession on CSR, and it may provide new evidence on the consequences of management succession.

The rest of this study is organized as follows. The next section reviews prior literature and develops several hypotheses. The third section describes the research design. The fourth section reports empirical results, and the last section concludes this study.

2. Literature Review and Hypothesis Development

2.1. Upper Echelons Theory, Family Firm Management and CSR

Upper echelons emphasizes that managers are important in firms’ decision-making processes, and their strategic choices are influenced by their personal attributes [2,21]. Upper echelons theory is appropriate for this study as founders’ and successors’ attributes apparently differ. CSR is a type of a firm’s strategic choice and top managers are in a position to make this decision [22]. Indeed, a large amount of research has documented that management with different characteristics can make different CSR decisions. For example, researchers find CEOs’ social status [3], career horizon [4], narcissism [11] and ability [5] significantly impact on firms’ CSR performance. Moreover, Manner (2010) [12] found that female CEOs, CEOs with a bachelor’s degree in humanities and those with rich career experience are also associated with better CSR performance.

Chinese family firm founders’ and successors’ personal values and cognitive styles apparently differ, probably resulting in different strategic decisions related with CSR engagement. In order to examine the impact of management succession on CSR activities based on upper echoes theory, it first needs to explore the differences in characteristics between the first and second generation owners of Chinese family firms.

2.2. Differences in the Characteristics of the First and Second Generations of Chinese Family Firms

The main differences between founders and successors of Chinese family firms are the development stage of their companies, educational level, confidence and social status. Compared to their parents, successors are better educated, more confident, have higher social status and the companies they manage are more stable and prosperous.

2.2.1. Firms’ Development Stage

According to Maslow’s hierarchy of needs, human needs are arranged in a hierarchy. From the bottom of the hierarchy upwards, people’s needs are physiological needs, safety needs, love and belonging needs, esteem needs and self-actualization needs [23]. Maslow stated that before progressing on to meet higher level growth needs, people must satisfy lower level deficit needs. Tuzzolino and Armandi (1981) [24] developed a mechanism for assessing CSR through proposing an organizational-need hierarchy, and state that firms have physiological, safety, affiliative, esteem and self-actualization needs that parallel those of humans as depicted by Maslow.

The need-hierarchy framework of Tuzzolino and Armandi (1981) [24] can be applied to the analysis of the differences between the first and second generations in terms of CSR engagement. The Chinese government has allowed the establishment of private enterprises by local people since the 1980s. The initial Chinese private entrepreneurs have built up their businesses from scratch [25]. The most important issue for first generations is to survive in the market through making enough profit, and so there are limited resources left for CSR practices. When the second generation inherits their family business, their firms have successfully survived and thrived in the competition, and many even have become leaders in their industries [26]. Having satisfied the lower-level profitability, safety and affiliative needs, those successors have enough resources and time to meet the higher-level needs of esteem and self-actualization, such as image creation, job enrichment and goal alignment, which are closely related to CSR [26].

2.2.2. Educational Level

Highly educated managers engage in CSR activities due to their farsightedness and high ability. Although CSR is vital for the long-term success of firms though gaining legitimacy and promoting a long-term positive image, it is expensive in terms of resources and opportunities [27,28,29]. Some managers, who do not realize the long-term benefits of CSR, are reluctant to actively implement CSR activities. Higher-educated managers are more capable of observing the importance of stakeholder protection [29]. Accordingly, Gadenne et al. (2009) [30] and Vives (2006) [31] argue that entrepreneurs with a higher level of education generate a greater level of commitment to CSR activities.

Moreover, managers’ educational level is a proxy for their competences and skills [2]. Top managers with higher educational degrees have greater ability for information processing and innovation, and are better at making decisions in a complex environment [32,33]. CSR is a complex issue which is closely related to various types of stakeholders, such as employees, external communities, and the general public [34]. However, it is difficult for entrepreneurial firms to simultaneously meet the expectations of all the stakeholders with limited resources [35]. Higher-educated managers have a greater ability for dealing with stakeholder perception. Accordingly, He et al. (2015) [29] empirically find top managers’ education degrees are positively related to company CSR performance. Beji et al. (2020) [36] argue that post-graduate management is positively correlated with a firm’s CSR.

The initial private enterprises in China (prior to 1993) have little relationship with the pre-socialist capitalists, and most founders come from poorer social background with fewer resources and lower education [25]. In contrast, most second generation successors have opportunities to receive high education, and some even possess degrees from prestigious foreign universities in developed countries. The differences in educational experience are expected to result in different strategic decisions related to CSR.

2.2.3. Social Status

Entrepreneurs with high social status engage in CSR due to the high expectation from stakeholders and their high ability in terms of CSR. Both the public and government have higher expectations for higher-social-status entrepreneurs regarding social responsibility [3,37]. For the public, they expect higher-social-status entrepreneurs to do more for the society. The government, who is the most important stakeholder, usually expect outstanding private entrepreneurs to actively engage in social governance. Higher-social-status entrepreneurs are more likely to fulfill such expectations due to the potential loss of legitimacy, reputation and resources once they violate the expectations [38]. Moreover, higher-social-status entrepreneurs usually enjoy preferential access to many valuable resources, and so they are more capable of implementing CSR strategies. As a reward for taking social responsibility, the government tends to supply these entrepreneurs with more resources. Consequently, higher-social-status entrepreneurs are expected to have more incentives to engage in CSR.

In the early years of the market transition, Chinese private enterprises lacked social legitimacy [39] and were considered to be “pariahs” [40], and encountered discrimination when dealing with banks and state agencies [41,42]. With the liberalization and development of China’s economy, the macro environment has been increasingly entrepreneurship-friendly [43]. People’s attitude towards successful entrepreneurs has also been changing, and some entrepreneurs even enjoy cult status in the popular media [26]. Relative to the first generation, the second-generation successors are born wealthy, and enjoy higher social status, thus resulting in higher incentives to engage in CSR activities.

2.2.4. Confidence

Psychological researchers [44,45,46] suggest that confident individuals are usually optimistic about their ability and the probability of success. In terms of CSR, confident managers tend to believe that their companies have enough resources to contribute to CSR practice and they are capable of meeting the expectations of both internal and external stakeholders. Moreover, CSR activities can usually bring managers media attention, admiration and praise from stakeholders, which are strongly needed by confident managers [37].

Relative to founders, second generation successors receive better education, enjoy higher social status, and inherit more stable and prosperous family businesses, and so they are probably more confident when making corporate strategic decisions, including CSR.

Hence, considering the differences in terms of firms’ development stage, education, social status and confidence between the first and second generations of Chinese family firms, the following hypothesis is proposed:

H1. 

Family firms which have initiated successions have better CSR performance compared to family firms which have not initiated successions and succession firms prior to their initiation of successions.

2.3. The Moderating Effects of Managerial Economic Motivations

Among a number of firm-specific factors, firms’ debt financing plans and political connections are chosen as moderating factors in this study, as these two factors can greatly influence family firm owners’ CSR behavior. First, one of the main problems that Chinese private enterprises face is capital constraints, as they always encounter discrimination when applying for loans from state-owned banks [47]. Second, many founders have cozy relationship with local and central governments, which is vital for the sustainable development of those family firms. When second generations succeed family business, an important role for them is to maintain and develop the political connections inherited from their parents [20]. In order to obtain capital from state-owned banks and maintain connections with the government, family firm successors have to pay more attention to CSR.

2.3.1. Debt Financing

Social relationship is an important factor that influences firms’ capital access and costs. Researchers [48,49] argue that banking transactions are embedded in social relations that uniquely shape credit access and costs in ways that are neglected by financial theory. Uzzi (1999) [49] argues that social embeddedness facilitates the transfer of private information among lenders and borrowers, so Uzzi finds firms are more likely to acquire loans and enjoy lower interest rates if their network of bank ties has a mix of embedded ties and arm’s-length ties.

China is a relationship-based economy, where social network takes precedence over legitimate decisions based on laws or regulations. The Chinese capital market is still underdeveloped, and so banking is an important area where companies obtain capital [50]. In China, the four state-owned commercial banks possess more than 70% of the total credit funds, and so currently the government still controls the allocation of credit funds, most of which are directed towards state-owned companies [51].

In order to obtain loans from banks, Chinese private entrepreneurs have to establish a cozy relationship with banks and the government, and CSR engagement is an important and effective way for that purpose. Through CSR activities, private enterprises can establish a good reputation and transmit positive information to banks, which can help banks make correct decisions in terms of credit allocation. By engaging in CSR activities, private enterprises can also help the government fulfill social responsibilities and establish a good relationship with the government, which in turn can lead to preferential access to bank loans. Accordingly, Talavera et al. (2012) [52] empirically find entrepreneurs contributing to charities are more likely to successfully obtain loans from banks. Based on the above discussion, it is expected that firms’ debt financing plans can strengthen the association between family firm succession and CSR engagement. Hence, the following hypothesis is proposed:

H2a. 

The impact of succession on the CSR performance of firms is more pronounced for succession family firms which intend to borrow money from banks.

2.3.2. Political Connection

China is still in the stage of transitional economy, and the government controls the allocation of the most important resources. In spite of the large contribution to the national economy made by private enterprises, they still face discrimination in terms of resource allocation. China is also a society where informal relationship plays a vital role in business. Therefore, political connection is a valuable asset bringing resources, security and privileges for Chinese private enterprises [53,54,55,56].

It takes private entrepreneurs a substantial amount of time and money to establish the relationship with the government, and it is also important for them to maintain it, as loss of political connection may result in great damage to a firm’s value and performance [57,58]. However, it is difficult for successors to entirely inherit political connections after they inherit management positions [59]. Consequently, for second-generation successors, they need to maintain and improve political connections carefully, and CSR engagement is an effective way for this purpose for two reasons [59,60,61]. First, in order to maintain their credibility, governments always choose reputable companies to establish connections. Engaging in CSR activities can help firms establish a good reputation and attract the government’s attention. Second, governments need money to fulfill some social responsibilities, and the financial support from private entrepreneurs results in the improvement of their connections with governments. As a result, it is expected that politically connected successors have more incentives and opportunities to engage in CSR, and political connections strengthen the association between family firm succession and CSR. Accordingly, the following hypothesis is proposed:

H2b. 

The impact of succession on the CSR performance of firms is more pronounced for succession family firms with politically connected successors.

3. Data and Research Design

3.1. Sample Selection and Data

All the financial and governance data were collected from China Stock Market and Accounting Research (CSMAR) from 2009 to 2018. All the family firms were identified from the Family Firm Database in CSMAR. The CSR performance of the Chinese listed companies was manually collected from Hexun.com, a professional website in terms of CSR of Chinese listed companies.

Following prior studies [20,62,63], it is considered that a succession occurs when a younger family member (son, son-in-law, daughter, daughter-in-law, nephew or niece) take the position of chairman/CEO or a directorship on the board. The first and second generations were identified using the Family Firm Database in CSMAR and CNRDS.

To examine the change of firms’ CSR after successions, the panel captured firm data from year t − 3 through year t + 2, where t is the year the family firm initiated the succession. After eliminating financial firms and firms with missing data, 701 family firms were identified, among which, 157 family firms have initiated successions during the sample period. As a result, the studies includes a total of 3835 and 844 firm-year observations for the full sample and succession family firm sample, respectively.

Table 1. Distribution of firm-year observations.

Year	Succession Family Firms	Total Samples
2009	18	77
2010	41	160
2011	91	298
2012	99	354
2013	100	429
2014	85	524
2015	92	481
2016	102	495
2017	105	502
2018	111	515

displays the sample distribution of succession firms and the total sample.

3.2. Difference-in-Difference Method

Following prior family business research [26,63], a difference-in-difference (DID) method was chosen to be used in this study. This study examines changes in the CSR performance of firms after family successors inherited their family business. However, a simple comparison of CSR performance between succession family firms and non-succession ones is misleading as the former may have greater incentives to engage in CSR, making it difficult to conclude that the improvement in CSR is caused by succession. Similarly, a simple comparison of firms’ CSR before and after successions is probably influenced by other micro environmental factors over time. In this research, the time of the second generation taking the position of chairman/CEO or a directorship on the board is the breakpoint where post–succession family firms and non-succession ones are considered treatment and controlled groups. Thus, differences in CSR in pre- and post- treatment cases between the treatment and control group are compared after controlling for any contemporaneous change.

3.3. Variable Names

3.3.1. Dependent Variable

Following Zhao et al. (2019) and Zhu (2020) [63,64], CSR is measured by the professional CSR evaluation scores (CSR) from Hexun.com. The evaluation system is investigated based on the following five elements: shareholder responsibility; employee responsibility; supplier, customer, and consumer rights responsibility; environmental responsibility and social responsibility. The weights of these five aspects are 30%, 15%, 15%, 20%, and 20%, respectively. The higher the total CSR score, the better the firm’s CSR performance.

3.3.2. Independent Variables

To enable the DID analysis, two independent variables are created. The first is a dummy variable (Succession firm) to differentiate between succession family firms and non-succession ones. Succession firm equals one if the second-generation has become the chairman/CEO or director of the firm and zero for family firms without successions in the sample period. The second independent variable (Post-succession) is a dummy variable indicating whether the firm is in a pre- or post-succession mode. Post-succession equals one if a family firm has begun a succession and zero if a succession has not occurred yet.

3.3.3. Control Variables

A set of control variables are included in the model, including firm size (Size), firm age (Age), firm leverage (Lev), financial performance (ROA), the market-to-book-ratio (Mvbv), cash flow from operations (Cash), sales growth (Salegrow), fixed assets (Tan), ownership of institutional investors (Inst), duality (Duality), board size (Bsize), director independence (Indir) and marketization index (Mkt). Industry and year dummies are also included to control for any industrial and temporal fixed effects. The detailed definitions of these variables are presented in

Table 2. Definitions of variables.

Variable	Definition
CSR	The CSR scores are taken from the professional CSR evaluation website Hexun.com. A higher CSR score indicates better CSR performance of listed firms.
Succession firm	Whether it is a succession family firm or not. It equals 1 if the firm begins a succession during 2009 and 2018 and 0 otherwise.
Post-succession	Whether a family firm is taking a succession or not. It equals 1 if management succession of the firm has begun and 0 if the succession has not occurred yet.
Loan	A dummy variable equaling 1 if a firm is going to borrow money from banks the next year and 0 otherwise.
PC	A dummy variable equaling 1 if the successor is currently holding or previously held a position in the People’s Congress, Chinese People’s Consultative Conference, has received honors from the government, or is a party member of Chinese Communist Party, and 0 otherwise.
Size	The natural logarithm of total assets.
Age	The natural logarithm of the number of years the company had been listed on stock exchanges.
Lev	Total liabilities/total assets.
ROA	Net profit/the average value of total assets at the beginning of the fiscal year and total assets at the end of the fiscal year.
Mvbv	Market value of equity/book value of equity.
Cash	Cash flow from operations divided by total assets.
Salegrow	Sales growth rate from previous year to current year.
Tan	Fixed assets scaled by total assets.
Inst	The percentage of institutional shareholdings.
Duality	A dummy variable equaling 1 if the CEO and chairman are the same person and 0 otherwise.
Bsize	The natural logarithm of the number of directors on the board.
Indir	The proportion of independent directors on the board.
Mkt	An index of market intermediaries development and institutional environment from Fan et al. (2011) [59], and the index captures the development of market intermediaries, such as lawyers, auditors and various industry associations, the efficiency of the local courts and the protection of property rights

. All the continuous variables are winsorized at the 1st and 99th percentiles.

3.4. The Empirical Model

To test the impact of family firm succession on the CSR performance of firms (Hypothesis 1), the following regression model is used:

$$\begin{array}{cc}\hfill \mathit{CSR}{}_{i,t}={\alpha }_0+{\alpha }_1& \mathit{Succession}\mathit{firm}{}_{i,t}+{\alpha }_2\mathit{Post}-\mathit{succession}{}_{i,t}+{\alpha }_3\mathit{Succession}\mathit{firm}{}_{i,t}\ast \mathit{Post}-\mathit{succession}{}_{i,t}\hfill \\ & +{\alpha }_4\mathit{Lnsize}{}_{i,t}+{\alpha }_5\mathit{Age}{}_{i,t}+{\alpha }_6\mathit{Lev}{}_{i,t}+{\alpha }_7\mathit{ROA}{}_{i,t}+{\alpha }_8\mathit{Mvbv}{}_{i,t}+{\alpha }_9\mathit{Cash}{}_{i,t}+{\alpha }_{10}\mathit{Salegrow}{}_{i,t}\hfill \\ & +{\alpha }_{11}\mathit{Tan}{}_{i,t}+{\alpha }_{12}\mathit{Inst}{}_{i,t}+{\alpha }_{13}\mathit{Duality}{}_{i,t}+{\alpha }_{14}\mathit{Bsize}{}_{i,t}+{\alpha }_{15}\mathit{Indir}{}_{i,t}+{\alpha }_{16}\mathit{Mkt}{}_{i,t}\hfill \\ & +{\epsilon }_{i,t}\hfill \end{array}$$

(1)

where the dependent variable is CSR, and Succession firm × Post-succession is the key explanatory variable. According to Hypothesis 1, ${\alpha }_3$ is expected to be significantly positive, suggesting that family firms that have initiated successions have better CSR performance relative to those that have not initiated successions and succession firms prior to the initiation of successions.

To explore the moderating effect of debt financing and political connection on the association between succession and CSR (Hypotheses 2a and 2b), model (2) is tested. The new variables used in Equation (2) include firms’ money-borrowing plans (Loan) and political connection (PC). The following OLS regression model is performed:

$$\begin{array}{cc}\hfill {\mathit{CSR}}_{i,t}={\beta }_0+{\beta }_1& \mathit{Post}-\mathit{succession}{}_{i,t}+{\beta }_2\mathit{Loan}{}_{i,t}+{\beta }_3\mathit{Post}-\mathit{succession}{}_{i,t}\ast \mathit{Loan}{}_{i,t}+{\beta }_{4}P{C}_{i,t}\hfill \\ & +{\beta }_5\mathit{Post}-\mathit{succession}{}_{i,t}\ast P{C}_{i,t}+{\beta }_6\mathit{Lnsize}{}_{i,t}+{\beta }_7\mathit{Age}{}_{i,t}+{\beta }_8\mathit{Lev}{}_{i,t}+{\beta }_{9}RO{A}_{i,t}\hfill \\ & +{\beta }_{11}\mathit{Mvbv}{}_{i,t}+{\beta }_{12}\mathit{Cash}{}_{i,t}+{\beta }_{13}\mathit{Salegrow}{}_{i,t}+{\beta }_{14}{\mathit{Tan}}_{i,t}\hfill \\ & +{\beta }_{15}\mathit{Inst}{}_{i,t}+{\beta }_{16}\mathit{Duality}{}_{i,t}+{\beta }_{17}\mathit{Bsize}{}_{i,t}+{\beta }_{18}\mathit{Indir}{}_{i,t}+{\beta }_{19}\mathit{Mkt}{}_{i,t}\hfill \\ & +{\theta }_{i,t}\hfill \end{array}$$

(2)

where Loan and PC represent firms’ debt financing plans and successors’ political connections, respectively. The key explanatory variables are Post-succession × Loan and Post-succession × PC. According to Hypotheses 2a and 2b, ${\beta }_3$ and ${\beta }_5$are expected to be significantly positive, meaning the impact of succession on firms’ CSR is more pronounced for succession family firms with debt financing plans and politically connected successors.

4. Results

4.1. Descriptive Statistics

Table 3. Descriptive statistics.

Full Sample						Succession Family Firm Sample
Variables	N	Mean	S.D.	Min	Max	N	Mean	S.D.	Min	Max
CSR	3835	25.521	14.912	−1.01	66.95	844	26.983	15.709	−0.53	65.74
Size	3835	21.630	0.852	19.865	24.873	844	21.673	0.614	20.001	22.754
Age	3835	2.006	0.878	1.099	7.607	844	2.248	1.069	1.099	7.607
Lev	3835	0.410	0.207	0.035	0.815	844	0.383	0.201	0.035	0.726
ROA	3835	0.045	0.062	−0.096	0.234	844	0.045	0.060	−0.083	0.231
Mvbv	3835	4.071	3.090	1.065	20.359	844	3.921	2.222	1.065	11.831
Cash	3835	0.058	0.076	−0.213	0.228	844	0.047	0.082	−0.213	0.228
Salegrow	3835	0.088	0.302	−0.752	1.043	844	0.075	0.354	−0.752	1.043
Tan	3835	0.248	0.141	0.003	0.570	844	0.233	0.136	0.003	0.522
Inst	3835	0.346	0.257	0.004	0.806	844	0.340	0.244	0.004	0.805
Dual	3835	0.47	0.502	0.000	1.000	844	0.470	0.502	0.000	1.000
Bsize	3835	2.123	0.178	1.609	2.565	844	2.106	0.144	1.792	2.398
Indir	3835	0.377	0.056	0.333	0.600	844	0.377	0.050	0.333	0.500
Mkt	3835	8.226	1.603	1.000	10.200	844	8.425	1.338	5.420	10.200

Note: For the full sample and succession family firm sample, there are respectively 3835/844 firm years. Variables are defined in Table 2.

presents the descriptive statistics of variables used in the analysis for both the full sample and succession family firm sample. As displayed by the results, the average value of CSR for the full sample is 25.521, which is smaller than 26.983 for the succession family firm sample. The results suggest succession family firms have better CSR performance relative to non-succession ones. Additionally, the mean value of Indir is 0.3777 for both full sample and succession firm sample, indicating that most Chinese family firms only maintain a minimum number of independent directors required by regulations to cater to policy makers.

4.2. Regression Results

Hypothesis 1 predicts that management succession has a significantly positive effect on family firms’ CSR performance.

Table 4. Impact of family firm succession on CSR.

Variables	Coefficient	t-stat.
Succession firm	4.055 *	1.76
Succession firm × Post-succession	5.051 ***	2.96
Size	2.988 ***	2.89
Age	−1.895 **	−1.92
Lev	7.561 *	1.75
ROA	8.382 **	2.06
Mvbv	2.241 *	1.87
Cash	2.050 **	1.97
Salegrow	1.668 ***	2.25
Tan	2.574 *	1.69
Inst	−5.964	−0.82
Duality	−8.040 **	−1.93
Bsize	−3.793	−0.23
Indir	−7.514	−1.39
Mkt	0.395 **	2.25
Intercept	−6.512 *	1.73
Year fixed effects	Yes
Industry fixed effects	Yes
Adj. R-sq	0.202
N	3835

Note: Table 4 presents multivariate regression results regarding the relationship between family firm succession and CSR. *, ** and *** indicate statistical significance at the 10%, 5% and 1% levels, respectively. The definitions of all the variables are presented in Table 2.

shows the results of estimating Equation (1), investigating the impact of family firm succession on CSR. As indicated by Table 4, there is a significantly positive association between Succession firm × Post-succession and CSR (p < 0.01), suggesting post-succession family firms have better CSR performance after the initiation of management successions. Some control variables in the regression, including Size, Age, Lev, ROA, Mvbv, Cash, Salegrow, Tan, Duality and Mkt are significant, suggesting larger firms, younger firms, firms with higher leverage, better financial performance, higher growth opportunity, higher cash flow ratio, higher sales growth, higher tangible assets ratio, separation of CEO and chair positions, and firms located in provinces with higher marketization index have higher CSR scores.

Hypotheses 2a and 2b predict that the impact of management succession on the CSR performance of succession firms is more pronounced for firms with debt financing plans and politically connected successors.

Table 5. The moderating effect of managerial economic motivations.

Variables	Coefficient	t-stat.
Post-succession	7.667 **	2.07
Loan	6.817	1.35
Post-succession × Loan	5.251 ***	2.68
PC	8.516	1.24
Post-succession × PC	6.192 ***	2.79
Size	3.822 ***	3.13
Age	−2.279 **	−2.01
Lev	4.476 *	1.75
ROA	8.937 **	2.12
Mvbv	3.996 ***	2.89
Cash	2.685 **	1.97
Salegrow	1.546 **	2.25
Tan	2.789 ***	3.27
Inst	4.332	0.42
Duality	−11.091 **	−2.12
Bsize	−1.005	−1.03
Indir	−8.333	−1.34
Mkt	0.320 *	1.65
Intercept	−3.121 **	−2.42
Year fixed effects	Yes
Industry fixed effects	Yes
Adj. R-sq	0.187
N	844

Note: Table 5 presents the moderating effect of companies’ debt financing plans and successors’ political connections on the relationship between succession and CSR. *, ** and *** indicate statistical significance at the 10%, 5% and 1% levels, respectively. The definitions of all the variables are presented in Table 2.

presents the multivariate tests of the association between succession and CSR of succession family firms conditional on firms’ debt financing plans and successors’ political connections. As indicated in Table 5, the coefficient on Post-succession is significantly positive at the 5% level. The coefficient on the first interaction variable (Post-connection × Loan) is significantly positive (p < 0.01), suggesting companies’ debt financing plans can strengthen the relationship between succession and CSR engagement, providing evidence to support Hypothesis 2a. Moreover, the coefficient on the second interaction variable (Post-succession × PC) is also significantly positive at the 1% level, indicating succession family firms with politically connected successors have better CSR performance. Hence, Hypothesis 2b is also supported. Other regression results regarding control variables are similar to those in Table 4.

4.3. Additional Analysis

The Hexun CSR index adopted in this study is based on the evaluation of five dimensions, including shareholder responsibility; employee responsibility; supplier, customer, and consumer rights responsibility; environmental responsibility; and social responsibility. This study further separately tests the impact of family firm succession on the five aspects of the Hexun CSR index, and

Table 6. Impact of family firm succession on CSR: CSR decomposition.

	(1)	(2)	(3)	(4)	(5)
	Shareholder	Employee	Supplier	Environment	Society
Succession firm	1.451 (1.16)	1.011 (0.97)	0.024 * (1.87)	0.460 ** (2.12)	3.299 ** (2.17)
Succession firm × Post-succession	0.919 * (1.74)	1.371 ** (2.05)	1.721 ** (2.10)	2.846 *** (2.57)	1.634 *** (2.92)
Intercept	−5.238 *** (−2.51)	−1.953 * (−1.71)	1.283 ** (2.40)	2.246 *** (2.65)	2.693 * (1.93)
Control	Yes	Yes	Yes	Yes	Yes
Year fixed effects	Yes	Yes	Yes	Yes	Yes
Industry fixed effects	Yes	Yes	Yes	Yes	Yes
Adj. R-sq	0.171	0.195	0.179	0.183	0.223
N	3835	3835	3835	3835	3835

Note: Table 6 presents the impact of family firm succession on the five aspects of firms’ CSR score. *, ** and *** indicate statistical significance at the 10%, 5% and 1% levels, respectively. The definitions of all the variables are presented in Table 2.

presents the regression results. As indicated by Table 6, the coefficients on Succession firm × Post-succession are significantly positive at 10%, 5%, 5%, 1% and 1% levels in columns (1), (2), (3), (4) and (5), respectively. Both founders and successors pay much attention to firms’ profitability, which is an important component of shareholder responsibility. As a result, the impact of succession on shareholder responsibility is only marginally significant (p < 0.1). The impact of family firm succession on firms’ environmental and social responsibility is comparatively more significant (p < 0.01), indicating successors invest much more in environmental and social activities relative to their parents.

4.4. Robustness Checks

Two robustness checks are conducted. First, CSR grade is used as a robust-dependent variable in models (1) and (2). Second, samples are divided into two groups based on successors’ positions in the company (successors taking positions of chairman/CEO and those only with directorships in the board) and hypotheses are re-tested.

4.4.1. CSR Grade

In Hexun.com, there is another index which can be used to measure CSR, that is, Hexun CSR grade. CSR grade is divided into five levels (A, B, C, D and E) from the top of the CSR score downwards. CSR grade is employed as a robust-dependent variable and all the hypotheses are re-tested using the grade. As indicated by

Table 7. The robustness test of CSR grade.

Panel A: The Impact of Succession on CSR Grade
Variables	Coefficient	t-stat.
Succession firm	0.212 *	1.74
Succession firm × Post-succession	0.134 ***	2.60
Intercept	−1.270 **	2.13
Year fixed effects	Yes
Industry fixed effects	Yes
Adj. R-sq	0.176
N	3835
Panel B: Moderating Effects
Variables	Coefficient	t-stat.
Post-succession	0.049 *	1.94
Loan	0.829	0.97
Post-succession × Loan	0.699 *	1.98
PC	0.586 *	1.82
Post-succession × PC	0.150 ***	3.49
Intercept	1.286 **	2.56
Year fixed effects	Yes
Industry fixed effects	Yes
Adj. R-sq	0.193
N	3835

Note: Panel A presents the impact of family firm succession on CSR grade. Panel B shows the moderating effects of firms’ debt financing and political connections on the relationship between succession and CSR grade. CSR grade is the dependent variable, which is coded as 5, 4, 3, 2 and 1 for the A, B, C, D and E level, respectively. *, ** and *** indicate statistical significance at the 10%, 5% and 1% levels, respectively. The definitions of all the variables are presented in Table 2.

, regression results are qualitatively similar to the main findings in Table 4 and Table 5.

4.4.2. Two Types of Successors

Second-generation successors are divided into two groups: one group with successors appointed as chairmen/CEOs, and the other with heirs only appointed as directors. The influence of succession on CSR may vary conditional on the different power of these two types of successors. Therefore, following Xu et al. (2015) [20], models (1) and (2) are re-tested using the two sub-samples. The main results, which do not significantly change compared to those in Table 3 and Table 4, are shown in

Table 8. Re-test of Hypotheses 1 and 2 based on two sub-samples of successors.

Panel A: The Impact of Succession on CSR Score
Variables	Coefficient	t-stat.	Coefficient	t-stat.
Succession firm	3.575 *	1.89	2.557 *	1.92
Succession firm × Post-succession	4.591 ***	3.02	5.123 ***	3.24
Intercept	−3.343 **	−2.13	−2.387 *	−1.87
Controls	Yes		Yes
Year fixed effects	Yes		Yes
Industry fixed effects	Yes		Yes
Adj. R-sq	0.196		0.173
N	3505		3321
Chow-test	−0.4232 (−0.74)
Panel B: Moderating Effects
Variables	Coefficient	t-stat.	Coefficient	t-stat.
Post-succession	5.098 *	1.73	4.847 **	2.23
Loan	3.214	1.02	4.574	1.05
Post-succession × Loan	3.484 ***	2.99	3.452 ***	3.19
PC	4.332	1.45	5.483	1.02
Post-succession × PC	5.232 ***	3.09	5.483 ***	3.37
Intercept	−1.020 **	−2.11	−2.029 *	−1.87
Controls	Yes		Yes
Year fixed effects	Yes		Yes
Industry fixed effects	Yes		Yes
Adj. R-sq	0.181		0.175
N	514		330
Chow-test	−0.1837 (−0.37)

Note: Panel A presents the impact of family firm succession on CSR score based on the two sub-samples. Panel B shows the moderating effects of firms’ debt financing and political connections on the association between succession and CSR based on the two sub-samples. *, ** and *** indicate statistical significance at the 10%, 5% and 1% levels, respectively. The definitions of all the variables are presented in Table 2.

. Additionally, Chow tests are performed and the results suggest no significant differences exist between the coefficients of the main variables.

5. Conclusions and Discussions

5.1. Conclusions

Using a sample of Chinese family firms from 2009 to 2018, this study investigates the impact of management succession on firms’ CSR. It first finds that compared to family firms that have not initiated successions and succession firms prior to their initiation of successions, family firms which have initiated successions have better CSR performance.

It further explores the impact of managerial economic incentives on the association between succession and CSR performance. The result suggests that the relationship between succession and CSR is more pronounced for succession family firms with debt financing plans and politically connected successors.

5.2. Implications

The study has several theoretical and practical implications. In terms of theoretical implications, it first adds to the manager-effect literature. Most studies [9,10] originating from upper echelons examine how individual managers or their particular characteristics influence firms’ operational and financing decisions, while they neglect the link between firm management succession, change of management styles and CSR differences. This study provides interesting evidence regarding the impact of firm managers’ intergenerational differences on their management decisions. Second, most family firm CSR research focuses on how and why family firms’ CSR performance is different from non-family ones [13,14,15]. Due to the popularity and importance of internal succession in family firms, especially those Chinese ones, it is meaningful to know how family firms’ CSR strategies change after the succession but there has been little research in this area to date. Therefore, this study casts light on the impact of management succession on the social performance of firms. Third, most family firm succession research studies the impact of succession on the short-term financial performance of firms [16,17,18,19,20]. CSR is closely related to the long-term sustainable development of firms, so exploring the association between succession and CSR provides new and important evidence regarding the impact of family firm succession.

In terms of practical implications, its results are useful to the government. Due to their vital role in national economy and the significant social power, Chinese family firms are expected to make a significant contribution in the Construction of a Harmonious Society, which has long been the main responsibility and task of the Chinese government in recent years [3]. Recently, most initial entrepreneurs of Chinese family firms have been facing the problem of becoming old and transferring their business to their descendants. Therefore, it is necessary for the government to understand CSR behavior of the second generation successors, and to encourage successors to actively engage in CSR activities. Actually, in recent years the central and local governments have held many political education activities for potential successors of family firms, but there has been no study providing empirical evidence regarding the social responsibility awareness of successors. This study empirically finds that as encouraged by the government, successors tend to actively implement CSR strategies and succession family firms have better CSR performance relative to founder-controlled firms.

5.3. Limitations and Future Research

This study has several limitations. First, this research has been carried out under the background of a dynamic institutional environment in terms of private enterprises, so the research conclusion cannot be applied in developed countries with relatively more stable political and economic environment. Second, the paper employs the year in which the family firm imitated the succession as the shock in the DID framework. However, it is probable that firms may anticipate the management decisions and change their behavior accordingly. As a result, it is expected that there is a possible association rather than totally credible causality between management succession and CSR. Therefore, future research may provide more evidence regarding the influence of family firm succession on CSR, or use more proper research methods to investigate this issue. Last, there are still a large number of family firms that have not begun successions, and there will be increasingly more family firms controlled by successors in the future. Therefore, adding the latest data into future related research will further improve the representativeness of the conclusions. Furthermore, due to the popularity of management succession on Chinese family firms in recent years, except for CSR, many other management styles of those succession firms are expected to significantly change. Therefore, it is meaningful for researchers to explore these issues, such as changes of green innovation, tax avoidance, corporate governance and information disclosure of succession family firms, and also the market reaction to these changes.