Corporate Social Responsibility and Financial Fraud: Evidence from China

Abstract

This paper investigates the impact of corporate social responsibility (CSR) on corporate financial fraud in China. We find that CSR scores are negatively associated with fraudulent financial activities, suggesting that CSR firms are less likely to engage in financial fraud. The results also indicate that the negative relation is more significant for CSR performance than CSR disclosure. Additionally, we demonstrate that the negative effect of CSR is more pronounced for firms with voluntary CSR practices, continuous CSR engagements, financial pressure, and internal control weaknesses. Overall, we find that CSR is an ethical behavior that reduces financial misconduct.

Keywords: CSR, Financial Fraud

JEL Classification: K42, M14