Corporate Social Responsibility Rating, Corporate Governance, and Financial Distress: Evidence from China

Abstract

This study investigates the relationship between corporate social responsibility (CSR) and financial distress in China using the O‐score and a Chinese sample of 4202 observations between 2011 and 2017. The relationship is accordingly more pronounced in weak corporate governance firms with low levels of institutional shareholders and free cash flow and among non‐state‐owned enterprises and mandatory CSR disclosure firms. The findings are robust to endogeneity through robustness checks and the 2013 Sichuan Lushan earthquake as an exogenous shock to CSR. Ultimately, the study will help investors, shareholders, and policymakers appreciate the impact of CSR dimensions.

Corporate social responsibility, CEO characteristics, and earnings management: Evidence from China

“…This study's sample contains two categories of CSRD forms, namely firms required to disclose their CSR reports and firms voluntarily reporting. To investigate whether mandatory CSRD has a significant effect on EM within Chinese firms, a new variable is coded for CSRD, which takes 1 if the firms are conducting mandatory reporting and 0 if they report voluntarily (Guotai et al, 2023). Then, the sample is divided into: (1) Mandatory CSRD (for Chinese firms required to disclose CSR reports) and (2) Voluntary CSRD (for firms that voluntarily disclose their CSR reports).…”

“…First, we collect CSR data rating. RKS is an independent third‐party rating Chinese agency whose CSR data have been widely used in the literature on CSR in China (see Gong et al, 2018; Guotai et al, 2023; Huang & Zhao, 2016; Sial et al, 2019) as a valid measure of CSR ratings.…”