Our latest pick of articles, this time covering CSR in China.

Corporate philanthropy and stock price crash risk: Evidence from China 
How to mitigate stock price crash risk has become a focus in the theoretical and practical fields. Building on the work of Kim et al. (J Bank Finance, 43:1–13, 2014b), this paper investigates the relation between corporate philanthropy and crash risk under the unique Chinese institutional background.

The results show that both state ownership and the 2005 split share reform attenuate the mitigating effect of corporate philanthropy on crash risk. Specifically, the negative relation between corporate philanthropy and crash risk is less pronounced for state-owned enterprises than for non-state-owned enterprises, and it is also less pronounced after firms accomplish the split share reform. Further, this effect is more pronounced for firms with greater financial risks and poorer performance.

This paper contributes to the growing literature on the determinants of stock price crash risk and the economic consequences of corporate philanthropy. It also offers useful guidance to firms that are seeking to reduce stock price crash risk in emerging markets.

Zhang, M., Xie, L. & Xu, H. 2016. Corporate Philanthropy and Stock Price Crash Risk: Evidence from China.  
Journal of Business Ethics, 139(3), 595–617.


Market reactions to the first-time disclosure of corporate social responsibility reports: Evidence from China  
Wang and Li examine whether investors value the disclosure of first-time standalone corporate social responsibility (CSR) reports, and whether market valuations differ between government-controlled and privately controlled firms.

Using a matched sample of Chinese publicly listed firms, the researchers find that CSR initiators have higher market valuations than matched CSR non-initiators, and CSR initiators controlled by the central and local governments have lower market valuations than CSR non-initiators and CSR initiators controlled by private shareholders.

Additional analyses demonstrate that CSR initiators with high CSR reporting quality and perceived credibility have higher market valuations than CSR initiators with low CSR reporting quality and medium or low perceived credibility of CSR reporting. Wang and Li do not find convincing evidence that CSR mandate, litigation risk, and prior stock returns affect market reactions to CSR reporting.

Overall, the authors find that the market values standalone CSR reports, and that CSR reporting quality and perceived credibility are important factors in market valuation.

Wang, K.T. & Li, D. 2016. Market Reactions to the First-Time Disclosure of Corporate Social Responsibility Reports: Evidence from China.  
Journal of Business Ethics, 138(4), 661–682. 


Do lenders applaud corporate environmental performance in Chinese private firms? 
This study extends previous literature on the association between corporate social responsibility and corporate financial behaviour by investigating the influence of corporate environmental performance on the cost of debt.

Using a sample of Chinese private-owned firms, the authors document strong and consistent evidence to show that corporate environmental performance is significantly negatively associated with the interest rate on debt—the proxy for the cost of debt.

The findings suggest that lenders applaud better environmental performance. Moreover, internal control attenuates the negative association between corporate environmental performance and the interest rate on debt, implying substitutive effects between corporate environmental performance and internal control on the reduction of interest rates on debt.

The results are robust to various sensitivity tests and are still valid after controlling for the potential endogeneity between corporate environmental performance and the interest rate on debt.

Du, X., Weng, J., Zeng, Q. et al. 2017. Do Lenders Applaud Corporate Environmental Performance? Evidence from Chinese Private-Owned Firms.  
Journal of Business Ethics, 143(1), 179–207. 


CSR under authoritarian capitalism: Dynamics and prospects of state-Led and society-driven CSR  
This article introduces the concept of corporate social responsibility (CSR) in the seemingly oxymoronic context of Chinese “authoritarian capitalism.” Following an introduction to the emergence of authoritarian capitalism, the article considers the emergence of CSR in China using Matten and Moon’s framework of explaining CSR development in terms both of a business system’s historic institutions and of the impacts of new institutionalism on corporations arising from societal pressures in their global and national environments.

Hofman and his team find two forms of CSR in China, reflecting the “multiplexity” of its business system: one in the mainly family-owned small and medium-sized enterprise sector reflecting concern with local reputation, and another in the corporate, mainly state-owned enterprise (SOE) sector, reflecting global and national societal expectations. The authors investigate the dynamics of CSR in China through the interplay of the global and national societal pressures and mediating and even leading roles played by the State and the Party.

The researchers consider the conceptual integrity and practical prospects for “state-led society-driven” CSR and future research opportunities, including those opened up by the three contributing articles to this special issue.

Peter S. Hofman, Jeremy Moon et al.. 2017. Corporate Social Responsibility Under Authoritarian Capitalism: Dynamics and Prospects of State-Led and Society-Driven CSR.
Business & Society, 56(5), 651 – 671.


Institutional forces affecting CSR in the Chinese food industry 
Food safety problems in China, such as deadly tainted milk, have attracted growing attention from a corporate social responsibility (CSR) perspective.

To examine the forces that potentially drive CSR behaviour within the Chinese food industry, this study is organized as follows. First, a review is conducted on the unique history of CSR in China as well as some of the major Chinese food scandals that have taken place. The primary drivers of CSR in China that have been suggested in the literature are then summarized. Next, new institutional theory perspectives are drawn upon to analyse three forces that potentially affect the behaviour of Chinese firms: (a) coercive isomorphism, (b) mimetic processes, and (c) normative pressures.

Based on a questionnaire survey of 164 Chinese managers and employees, the CSR behaviour of firms operating in the Chinese food industry is found to only be significantly affected by the institutional factor of normative pressures. The study concludes with its limitations as well as the implications of the findings.

Wei Zuo, Mark S. Schwartz, Yuju Wu. 2017. Institutional Forces Affecting Corporate Social Responsibility Behavior of the Chinese Food Industry.  
Business & Society, 56(5), 705 – 737.


Consumer responses to corporate environmental actions in China 
As a result of the increasing public attention to environmental crises, corporate environmental actions and their effects are a current research hotspot.

This study examines how two types of corporate environmental actions (symbolic and substantial environmental actions) influence consumers’ perceptions of environmental legitimacy and subsequent purchase intentions. Using experimental method, this study finds that

(1) substantial environmental action induces significantly higher perceptions of environmental legitimacy than symbolic environmental action,

(2) this effect can be attenuated by corporate environmental reputation, and

(3) consumer-based environmental legitimacy has a significantly positive effect on consumers’ purchase intentions. These findings have interesting implications for both researchers and practitioners involved in green marketing.

Li, J., He, H., Liu, H. et al. 2017. Consumer Responses to Corporate Environmental Actions in China: An Environmental Legitimacy Perspective.  
Journal of Business Ethics, 143(3), 589–602.