Corporate social responsibility in the era of government subsidies: A novel empirical perspective on market competitiveness

Abstract

Corporate social responsibility (CSR) is essential for businesses as it builds reputation and stakeholder trust, drives innovation, and contributes to social welfare. This study evaluates the impact of government support on CSR under various scenarios, using a dataset of 98 listed companies from Bangladesh and 111 from China between 2011 and 2023. Theoretical links are established by constructing a model representing an oligopolistic market of privately owned firms. The results suggest that the introduction of government support motivates private firms to comply with social obligations. This theoretical claim is supported by product market competition, which acts as an intermediary. The effect is evident across the whole lifespan of the firm. Furthermore, the correlation is stronger concerning competitive industries, businesses without political ties, and low‐ and medium‐size government subsidies. The results also show that the main channel through which government subsidies affect CSR is product market competition; however, the evidence is country‐specific. This suggests that the efficient allocation of financial resources is of great importance in this situation.