Sociopolitical activity and corporate default risk: Evidence from the targeted poverty alleviation program in China

Ziqiao Wang, Wei Zhang and Xiaotao Zhang

International Review of Financial Analysis, 2024, vol. 96, issue PA

Abstract: This study examines the impact of corporate sociopolitical activity on firm-level default risk under the unique setting of China's Targeted Poverty Alleviation (TPA) program. We show that firms participating in the TPA program exhibit lower default risk compared to those that do not participate. This impact is more pronounced among firms with greater media endorsement, higher attention from market participants, and stronger corporate governance. Additionally, we find that TPA participation leads to concurrent reductions in both market-based and accounting-based risks. These findings enrich the non-market strategy literature by emphasizing the economic benefits of aligning the objectives of Corporate Social Responsibility (CSR) and Corporate Political Activity (CPA) to improve corporate risk management.

Keywords: Targeted poverty alleviation; Non-market strategy; Default risk; Corporate social responsibility; Corporate political activity (search for similar items in EconPapers)
JEL-codes: D72 G32 G33 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:96:y:2024:i:pa:s1057521924004939

DOI: 10.1016/j.irfa.2024.103561

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