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Natural disasters and CSR: Evidence from China

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  • He, Zhongda
  • Guo, Biao
  • Shi, Yukun
  • Zhao, Yang

Abstract

Using detailed natural disaster data and a sample of Chinese listed firms over the period 2011–2019, we examine the link between natural disasters and firms' corporate social responsibility (CSR) performance. We find that both the presence of a severe natural disaster and the number of disaster categories are significantly associated with higher CSR activities in the affected area. Next, we explore why firms are motivated to increase their CSR engagement in the disaster area. Our empirical evidence shows that state ownership, political connections, and institutional ownership are the main driving forces that spur CSR activities in the disaster area. Moreover, large firms and firms with high financial constraints are more motivated to increase their immediate CSR activities following natural disasters. We also find that CSR activities during the disaster period reward firms with better future accounting and stock market performance than those in the non-disaster period. Overall, our findings suggest that state ownership, political connections, institutional ownership, and future firm performance create incentives for firms to enhance CSR investments following natural disasters.

Suggested Citation

  • He, Zhongda & Guo, Biao & Shi, Yukun & Zhao, Yang, 2022. "Natural disasters and CSR: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:pacfin:v:73:y:2022:i:c:s0927538x22000725
    DOI: 10.1016/j.pacfin.2022.101777
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    More about this item

    Keywords

    Natural disasters; CSR; state ownership; Political connection; Financial performance;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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