Regional Climate Risk and Corporate Social Responsibility: Evidence from China

ABSTRACT

Although firms suffer from regional climate risk in their production and operation, they are still highly expected by the public to play a leading role in addressing regional climate risk. In this paper, we study how regional climate risk affects corporate social responsibility (CSR). By constructing regional climate risk indicators and employing the OLS method to conduct empirical analyses, we find that regional climate risk can significantly promote CSR. Furthermore, regional climate risk can suppress firm’s cash flow, thereby exerting internal pressure on firms to assume CSR. Meanwhile, regional climate risk can raise higher public expectations for firms, imposing external pressure on them to assume CSR. We suggest that external pressure from the public plays a dominant role in CSR decision-making. Besides, we confirm that CSR can achieve a win-win goal for both firms and the public by mitigating the damage of regional climate risk on the firm’s long-term performance. We provide a new perspective for studying firm’s motivation to assume CSR under the influence of regional climate risk.

KEYWORDS:

• CSR
• regional climate risk
• public expectation
• cash flow
• long-term performance

JEL:

• G31
• M14
• D21

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Data Availability Statement

All data that support the findings in this manuscript can be provided upon request.

Notes

1. Number of persons (including nonpermanent population) who suffered losses due to natural disasters in the administrative region.

2. Losses resulting from the diminution or loss of the value of an affected body as a result of a natural disaster. The basic calculation of direct economic loss is the product of the actual value of the affected body before destruction and the rate of destruction.

Additional information

Funding

This research is supported by Ministry of Education Key Project (Class A) on Chinese Excellent Traditional Culture (Nishan World Confucianism Center/China Confucius Foundation Project Fund) [23JDTCA053], the Education of Humanities and Social Science Research on Planning Fund Project [23YJAZH163].