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Does Corporate Social Responsibility Impact on Corporate Risk-Taking? Evidence from Emerging Economy

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Listed:
  • Xiao Li

    (Systems and Industrial Engineering Technology Research Center, Zhongyuan University of Technology, Zhengzhou 451191, China)

  • Gang Liu

    (Hubei Enterprise Culture Research Center, Hubei University of Economics, Wuhan 430205, China)

  • Qinghua Fu

    (Department of Business Administration, Moutai Institute, Renhuai 564507, China)

  • Abdul Aziz Abdul Rahman

    (College of Business Administration, Kingdom University, Riffa 40434, Bahrain)

  • Abdelrhman Meero

    (College of Business Administration, Kingdom University, Riffa 40434, Bahrain)

  • Muhammad Safdar Sial

    (Department of Management Sciences, COMSATS University Islamabad (CUI), Islamabad 44000, Pakistan)

Abstract

This study analyzes the impact of corporate social responsibility (CSR) fulfillment on corporate risk-taking to assist stakeholders in identifying the “double-edged sword” role of CSR activities and provide empirical evidence for enterprises to properly carry out CSR activities. The results show that the self-interest instrumentalization of CSR activities intensifies agency conflict, and CSR fulfillment weakens risk-taking to a certain extent. When CSR fulfillment reaches a certain value, CSR activities can improve risk-taking. Then, CSR fulfillment and risk-taking show a U-shaped relationship. Further analysis shows that the impacts of CSR on debt financing and R&D input reflect the U-shaped effect pathways of CSR fulfillment on risk-taking. Finally, it is suggested that CSR activities should be avoided to become the “self-interest tool” of the management. The regulators guide enterprises to break through the inflection point of the U-shaped effect and consider more for the stakeholders’ overall interests. Additionally, the regulators establish an effective compensation system to ensure that the enterprises with adequate CSR fulfillment obtain high-quality capital resources and promote the sustainable development of the capital market.

Suggested Citation

  • Xiao Li & Gang Liu & Qinghua Fu & Abdul Aziz Abdul Rahman & Abdelrhman Meero & Muhammad Safdar Sial, 2022. "Does Corporate Social Responsibility Impact on Corporate Risk-Taking? Evidence from Emerging Economy," Sustainability, MDPI, vol. 14(1), pages 1-26, January.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:1:p:531-:d:717496
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    References listed on IDEAS

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    1. Ming-Chuan Chen & Chen-Fu Lee & Chien-Ming Huang, 2016. "The Effects of Corporate Social Responsibility on Equity Fund Returns: Evidence from China," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(10), pages 92-102, October.
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    3. David Abad & M. Fuensanta Cutillas-Gomariz & Juan Pedro Sánchez-Ballesta & José Yagüe, 2018. "Real Earnings Management and Information Asymmetry in the Equity Market," European Accounting Review, Taylor & Francis Journals, vol. 27(2), pages 209-235, March.
    4. Nguyen, Pascal, 2011. "Corporate governance and risk-taking: Evidence from Japanese firms," Pacific-Basin Finance Journal, Elsevier, vol. 19(3), pages 278-297, June.
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    Cited by:

    1. Xiaodong Teng & Kun-Shan Wu & Lopin Kuo & Bao-Guang Chang, 2023. "Investigating the double-edged sword effect of environmental, social and governance practices on corporate risk-taking in the high-tech industry," Oeconomia Copernicana, Institute of Economic Research, vol. 14(2), pages 511-549, June.
    2. Mbanyele, William & Muchenje, Linda T, 2022. "The dark side of weakening shareholder litigation rights: Evidence from green patenting activities," Finance Research Letters, Elsevier, vol. 47(PB).
    3. Qian Wang & Huiru Chen & Yajiong Xue & Huigang Liang, 2022. "How Corporate Social Responsibility Affects Firm Performance: The Inverted-U Shape Contingent on Founder CEO," Sustainability, MDPI, vol. 14(18), pages 1-24, September.
    4. Guo, Chunying & Yang, Baochen & Fan, Ying, 2022. "Does mandatory CSR disclosure improve stock price informativeness? Evidence from China," Research in International Business and Finance, Elsevier, vol. 62(C).
    5. Haifei Wang & Hongjun Wu & Peter Humphreys, 2022. "Chinese Merchant Group Culture, Corporate Social Responsibility, and Cost of Debt: Evidence from Private Listed Firms in China," Sustainability, MDPI, vol. 14(5), pages 1-18, February.

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