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How do political connections affect corporate social responsibility? A quasi-natural experiment

Author

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  • Hu, Yiwen
  • Shao, Yanmin

Abstract

Prior research offers mixed conclusions about the economic effects of political connections. Leveraging a regulatory reform in China that prohibits officials from holding corporate positions, we construct a quasi-natural experiment and apply a difference-in-differences model to assess the impact of political connections on corporate social responsibility (CSR) performance. Using data from 2626 firms listed on China’s A-share market, we find that losing political connections leads to a 10.22 % decline in CSR performance. This effect is mainly driven by the forced removal of politically connected executives in supervisory, rather than authoritative, roles. The impact is more pronounced among state-owned enterprises and firms in high-corruption regions. Additionally, the decline in CSR is associated with increased idiosyncratic risk. This study contributes to CSR–finance literature by identifying the financial consequences of CSR deterioration linked to the loss of political ties.

Suggested Citation

  • Hu, Yiwen & Shao, Yanmin, 2025. "How do political connections affect corporate social responsibility? A quasi-natural experiment," Finance Research Letters, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:finlet:v:84:y:2025:i:c:s154461232501013x
    DOI: 10.1016/j.frl.2025.107755
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    1. Xu, Yanhui & Jin, Yangyang & Deng, Fuhua & Feng, Qianbin, 2025. "Disruption of customers' political connections and suppliers' ESG performance: Evidence from China," Finance Research Letters, Elsevier, vol. 86(PF).

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