The brighter side of being socially responsible: CSR ratings and financial distress among Chinese state and non-state owned firms

ABSTRACT

We examine the effect of corporate social responsibility (CSR) quality ratings on the financial distress levels of Chinese enterprises by using the previously unexplored new China-specific Altman ‘Z_China Score’ in the context of CSR and data from 749 firms over the 2009–2014 period. First, we find that CSR quality ratings significantly reduce Chinese firms’ distress levels. Second, we find that the ability of CSR to reduce distress levels in non-state-owned Chinese firms is higher than state-owned ones. Finally, we find similar results when we divide the data into high-low CSR ratings and levels of distress. Our results are robust to potential endogeneities.

KEYWORDS:

• Corporate Social Responsibility (CSR) quality ratings
• financial distress
• altman Z_China score
• state and non-state owned firms
• China

JEL CLASSIFICATION:

• G33
• M14
• M21
• M41

Disclosure statement

No potential conflict of interest was reported by the authors.