De‐politicization and corporate social responsibility: Empirical evidence from China

Abstract

Given the lack of consensus in the existing studies about the impact of political resources on corporate social responsibility (CSR), we delve into this relationship and analyze the underlying mechanisms. To address the endogenous problems associated with political connection, this paper explores the consequence of de‐politicization and adopts an exogenous event in China. Results indicate that de‐politicization significantly enhances the CSR performance of firms. Specifically, de‐politicization can lead to a 1.474 increase in CSR scores. This finding is further supported by various robustness tests. Additionally, this paper probes into the reasons for the positive influence focusing on prerequisite and driving forces. For one thing, de‐politicization reduces the rent‐seeking expenses of politically connected firms, thereby granting these firms enough financial resources to improve their CSR performance. For another thing, CSR practices can convey positive information, improve financial performance, and enhance competitiveness, which motivates firms to actively participate in CSR issues to alleviate the adverse influence of losing political connection. This paper enriches the existing research on political connections and provides theoretical guidance and policy recommendations for improving CSR in developing countries.