Understanding the puzzle of polluting companies' social responsibility

Kaixia Zhang and Weibing Li

China Economic Review, 2024, vol. 84, issue C

Abstract: We call the paradoxical phenomenon that polluting companies, which are widely perceived as lacking a sense of social responsibility, actively engage in socially responsible behavior (e.g., making donations) the puzzle of polluting companies' social responsibility. Theoretically and empirically, we document that access to local government discretion in the standard for collecting pollutant discharge fees is an important reason for polluters to make donations. Using data on Chinese listed companies and the multi-period difference-in-differences (DID) design, we examine the effect of donations made by polluting companies on pollutant discharge fees paid by them. We consistently find that polluting companies that make donations face lower pollutant discharge fees, even as their pollutant emissions continue to rise than companies that do not make donations. Also, environmental, social, and governance (ESG) ratings of polluters by third-party organizations and different intensities of environmental regulations faced by polluting companies significantly affect the relationship between charitable donations and pollutant discharge fees.

Keywords: Donations; Pollutant discharge fees; ESG ratings; Environmental regulations (search for similar items in EconPapers)
JEL-codes: D22 G30 Q52 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:84:y:2024:i:c:s1043951x24000178

DOI: 10.1016/j.chieco.2024.102128

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