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Do corporate social responsibility reduce crash risk of stock price: evidence from China

Kun Su (School of Management, Northwestern Polytechnical University, Xi'an, China)
Ziting Zhou (School of Management, Northwestern Polytechnical University, Xi'an, China)

Chinese Management Studies

ISSN: 1750-614X

Article publication date: 10 March 2022

Issue publication date: 20 January 2023

996

Abstract

Purpose

The 2008 global financial crisis stimulated the research interest in stock price crash risk. However, the determinants of stock price crash risk remain unclear, especially in transitional economies. The purpose of this paper is to investigate the association between corporate social responsibility (CSR) and stock price crash risk, as well as the moderating effects under different contexts.

Design/methodology/approach

Using firm-level data of listed firms in China from 2010 to 2019, this paper estimates with correlation analysis and multiple regression analysis.

Findings

This paper’s empirical results show that the constraint of CSR on bad news hoarding behavior can reduce stock price crash risk. Further research shows that internal CSR has a significant effect on crash risks, while external CSR has not. Additionally, CSR has a relatively weak impact on crash risk in state-owned enterprises, enterprises with higher internal control quality and enterprises with better regional financial development.

Originality/value

This paper contributes to the stock price crash risks literature by examining the CSR-stock price crash risk linkage in a Chinese context, revealing collective explanations under different contexts with important implications for the application of CSR in business practice.

Keywords

Acknowledgements

Funding: This study was supported by the National Natural Science Foundation of China (No.71773088; No.72172127), The Innovation Capability Support Plan–Soft Science Research Plan of Shaanxi (No.2022KRM126).

Citation

Su, K. and Zhou, Z. (2023), "Do corporate social responsibility reduce crash risk of stock price: evidence from China", Chinese Management Studies, Vol. 17 No. 2, pp. 251-273. https://doi.org/10.1108/CMS-07-2021-0309

Publisher

:

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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