Corporate social responsibility and stock price crash risk

Ming-Te Lee (Department of Accounting, Ming Chuan University, Taipei, Taiwan)

Managerial Finance

ISSN: 0307-4358

Publication date: 10 October 2016



The purpose of this paper is to test opposing views of the relationship between corporate social responsibility (CSR) and stock price crash risk in a major Asian emerging stock market.


This paper suggests an endogenous relationship between CSR and stock price crash risk. Hence, this paper uses two-stage least squares regression analysis to address the bias and inconsistency associated with endogeneity issues. Moreover, previous studies argue that the level of effectiveness of corporate governance significantly affects firm-specific stock price crash risk. Thus, this paper further divides the overall sample into two sub-samples according to the median of the corporate governance index. Furthermore, this paper investigates the impact of CSR on stock price crash risk under corporate governance.


The empirical results show that CSR significantly mitigates Taiwanese stock price crash risk. This finding is consistent with the notion that socially responsible Taiwanese firms commit to a higher standard of transparency and engage in less bad news hoarding, thus reducing crash risk. The empirical results also show that CSR has a more pronounced effect in mitigating crash risk for Taiwanese firms with less effective corporate governance.


The study findings indicate that CSR plays a more important role in reducing crash risk for Taiwanese firms with weak governance mechanisms.



The author would like to thank Don Johnson (the Editor) and two anonymous referees for their helpful comments and suggestions.


Lee, M. (2016), "Corporate social responsibility and stock price crash risk", Managerial Finance, Vol. 42 No. 10, pp. 963-979.

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