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| Integrity Culture and Social Responsibility of Financial Enterprises |
| TIAN Zifang, ZUO Congjiang, LI Tao, ZHAO Xuankai
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| School of Economics, Central University of Finance and Economics |
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Abstract In the financial culture with Chinese characteristics, integrity holds the most important position. Its significance is self-evident. Excellent traditional Chinese culture emphasizes the importance of keeping promises. Because the financial industry is built on credit, it must always adhere to the spirit of contracts, which means being honest, trustworthy, and not crossing ethical boundaries. Unlike formal systems that rely on administrative regulation and economic punishment, an integrity culture internalizes social responsibility. It turns social responsibility into a form of self-regulation and moral discipline for financial firms through shared values, information flows, social control, reputation mechanisms, and common beliefs. This demonstrates a strong effect on social responsibility governance. Unfortunately, due to limitations in data availability and research methods, there is very limited research on this topic.
In recent years, the rapid development of machine learning has offered a new solution. Some scholars have started to use Large Language Models (LLMs) to measure the cultural traits of individual firms. This approach helps overcome a key problem in traditional research, where measures of culture were often too broad and cultural elements were difficult to scientifically identify. Compared to traditional static dictionaries, LLMs have two key advantages. First, they can dynamically learn from the latest data to generate answers, which reduces the problem of outdated or incomplete dictionaries. Second, LLMs are built on deep learning algorithms and neural networks, allowing them to accurately capture context and the deep relationships in language. This overcomes the potential inaccuracies of dictionary methods and improves the validity and accuracy of indicators for financial culture.
This paper uses text data from the annual reports of financial companies listed on the Shanghai and Shenzhen A-share markets. Based on an LLM, we construct an index to measure the strength of integrity culture at the firm level. We then examine if and how this integrity culture affects the CSR performance of these firms. Our research finds that an integrity culture has a significant positive effect on the CSR performance of listed financial companies. This conclusion remains valid even after a series of robustness tests, including using instrumental variables to address endogeneity and using different ways to measure variables. Furthermore, a heterogeneity analysis shows that this positive effect is stronger for certain types of firms. These include start-ups, firms in financial distress, firms with highly concentrated ownership, and those located in areas with lower levels of market development and less external attention. A study of the mechanisms reveals that integrity culture improves CSR performance primarily by reducing information asymmetry and lowering operating risks. This means that an integrity culture strengthens a company's operations and its interactions with stakeholders while weakening opportunistic and short-sighted behaviors, thereby reducing the company's business risks. This paper's policy implications are as follows: To build a strong financial nation, policymakers should promote an integrity culture to improve corporate social responsibility in financial firms. These policies must be carefully targeted, considering firm characteristics, governance, and the economic environment.
This paper makes three main contributions. First, this study is one of the first to use LLMs to construct an integrity culture index for Chinese listed financial companies from the perspective of informal institutions, filling a research gap by deeply investigating whether integrity culture influences the social responsibility performance of financial institutions. Second, after finding that an integrity-based culture impacts CSR, the paper identifies and verifies two key mechanisms: reducing information asymmetry and lowering business risk. This confirms that integrity culture works through the dual pathways of increasing information transparency and optimizing corporate governance. Finally, this research not only enriches the literature on corporate social responsibility but also provides new perspectives for interdisciplinary research that combines finance, sociology, and computer science. While existing studies have produced rich findings on CSR from the perspectives of firm-level factors, corporate governance, and the external environment, few scholars have tried to quantify financial culture or scientifically measure its effect on CSR performance. This paper addresses this gap by focusing on an integrity-based financial culture, revealing its positive impact on CSR.
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Received: 24 January 2025
Published: 02 October 2025
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