Political sentiment and corporate social responsibility

Mostafa Monzur Hasan and Haiyan Jiang

The British Accounting Review, 2023, vol. 55, issue 1

Abstract: This paper examines the association between firm-level political sentiment and corporate social responsibility (CSR). Drawing inferences from signaling and resource-based theory, we posit a positive relationship between political sentiment and CSR. Using 23,160 firm-year observations of US public firms between 2002 and 2018 as our sample, we find empirical support for our prediction. In addition, the positive relationship between political sentiment and CSR is driven by the environment, community relations, employee relations, and diversity dimensions of CSR activities. We find consistent evidence when we measure CSR using some ‘real effect’ variables. Our cross-sectional analyses reveal that the positive association between political sentiment and CSR is more evident for firms that have a high level of information asymmetry and firms that are large, mature, and active in political lobbying. Our findings remain robust to a batch of sensitivity and endogeneity tests. Overall, our findings advance the literature by highlighting the interplay between politics and firms in an ever-changing political environment.

Keywords: Political sentiment; CSR; Information asymmetry; Resource-based theory (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:bracre:v:55:y:2023:i:1:s089083892200110x

DOI: 10.1016/j.bar.2022.101170

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