Government-led CSR effort, innovation, and firm value: Evidence from a quasi-natural experiment in China

Jianfu Shen, Daoju Peng and Yue Zhou

Research in International Business and Finance, 2025, vol. 77, issue PA

Abstract: Utilizing a quasi-natural experiment that mandates a subset of publicly listed firms in China to disclose corporate social responsibility (CSR) reports, this study examines the impact of a government-led CSR effort on innovation. The comparison between mandatorily disclosed firms and voluntarily disclosed firms disentangles the government-led CSR effort from the aggregate disclosure effect. Our findings reveal that firms that are subject to the government mandate experience a significant increase in patents quantity and quality. This effect is pronounced for both green and non-green innovations. The innovative effect of the mandate is primarily driven by real changes in improved access to government subsidies and increased analyst coverage following the implementation of the mandate, indicating that meeting government-led CSR expectations spurs innovations due to benefits from both the government and the market. Further analysis demonstrates that firm value and stock returns exhibit positive responses to the enhanced innovation resulting from the government-led mandate, effectively mitigating the negative effects of the CSR reporting. This study emphasizes the critical role of government-led CSR effort on firm innovation and provides compelling ground for considering the widespread government involvement in CSR activities around the world in recent years.

Keywords: Government-led CSR effort; Mandatory CSR disclosure; Innovation; Subsidies; External monitoring; Firm performance (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:77:y:2025:i:pa:s0275531925001795

DOI: 10.1016/j.ribaf.2025.102923

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