Does CSR Engagement Deter Corporate Misconduct? Quasi-natural Experimental Evidence from Firms Joining a Government-Initiated Social Program in China

Feng He (), Xin Huang (), Guanchun Liu () and Ziqiao Wang ()
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Feng He: Capital University of Economics and Business
Xin Huang: Hunan University of Technology and Business
Guanchun Liu: Lingnan College, Sun Yat-Sen University
Ziqiao Wang: Tianjin University

Journal of Business Ethics, 2024, vol. 193, issue 3, No 6, 555-587

Abstract: Abstract We examine the impact of a government-initiated CSR project on corporate misconduct using the unique setting of China’s Targeted Poverty Alleviation (TPA) program. The difference-in-differences estimates show that firms participating in the TPA program engage in fewer misconduct activities than do their counterparts. This finding is robust to the parallel trends test, the placebo test, alternative regression specifications, alternative research designs, the reverse causality analysis, and the bivariate probit model with partial observability. Further analysis shows that TPA participation enhances the ability of external financial professionals to monitor performance by stimulating the dissemination of TPA-related incremental information, thereby contributing to the decline in corporate misconduct. The cross-sectional heterogeneity analysis shows that the impact of TPA participation on corporate misconduct is more pronounced in firms with higher information asymmetry, with weaker political connections, and with weaker internal governance. Furthermore, we find evidence that TPA participation improves corporate financial performance but does not deteriorate information transparency.

Keywords: Targeted poverty alleviation; Corporate misconduct; Information environment (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (15)

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DOI: 10.1007/s10551-023-05589-5

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