Supply chain contagion effects of negative CSR events: A stock market reaction perspective

Negative corporate social responsibility (CSR) events substantially expose supply chains to risk. Understanding the effects of such events on suppliers and customers is crucial for strengthening the resilience of supply chain systems. Using a sample of Chinese A-share listed companies from 2016 to 2021, we employ the event study method to demonstrate that negative CSR events create a contagion effect in supply chains. Such contagion effect is asymmetric, affecting the capital market performance of customers more negatively than it does that of suppliers. Further analysis indicates that both the closeness of supply chain relationships and the level of economic policy uncertainty reinforce the contagion effect. The mechanism analysis suggests that the contagion effect originates from the damaged reputation of suppliers or customers and the reduction in shared investment value. In addition, the contagion effect is stronger when the core company is nonstate-owned and has a lower social responsibility score. These findings contribute to the understanding of CSR contagion effects from the perspective of supply chain relationships. Meanwhile, our study highlights that companies can focus on CSR events to strengthen their supply chain CSR management and improve the overall security and stability of supply chain systems.