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

Do corporate social responsibility reduce crash risk of stock price: evidence from China 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/approachUsing firm-level data of listed firms in China from 2010 to 2019, this paper estimates with correlation analysis and multiple regression analysis.FindingsThis 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/valueThis 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Chinese Management Studies Emerald Publishing

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

Chinese Management Studies , Volume 17 (2): 23 – Jan 20, 2023

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References (122)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1750-614X
eISSN
1750-614X
DOI
10.1108/cms-07-2021-0309
Publisher site
See Article on Publisher Site

Abstract

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

Journal

Chinese Management StudiesEmerald Publishing

Published: Jan 20, 2023

Keywords: Corporate social responsibility; Stock price crash risk; Ownership structure; Internal control; Regional financial development

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