Stock Market Liberalization and Corporate Social Responsibility: Evidence From a Quasi-Natural Experiment in China

Posted: 20 Jan 2021 Last revised: 31 May 2022

See all articles by Thomas J. Chemmanur

Thomas J. Chemmanur

Boston College - Carroll School of Management

Dequan Jiang

School of Economics and Management - Wuhan University

Weiping Li

Sun Yat-sen University

Jeffrey Pittman

Memorial University ; Virginia Tech

Zi-Tian Wang

Nanjing University

Date Written: December 1, 2020

Abstract

Exploiting a quasi-natural experiment in China in which some firms become investible to the global market across different periods (i.e., pilot firms), we find that pilot firms significantly reduce their CSR investments from the pre-liberalization period to the post-liberalization period, relative to non-pilot firms that remain under strict capital controls during the same timeframe. Additional analyses suggest that pilot firms enjoy higher labor productivity and better stock performance after reducing their CSR activities, but emit more pollution afterward. Our results suggest that market liberalization induces local firms to curtail their CSR activities, benefiting shareholders at the expense of the environment.

Keywords: stock market liberalization; corporate social responsibility (CSR); firm value; labor productivity; environmental effects

JEL Classification: F65, G32, M14, O44

Suggested Citation

Chemmanur, Thomas J. and Jiang, Dequan and Li, Weiping and Pittman, Jeffrey A. and Wang, Zi-Tian, Stock Market Liberalization and Corporate Social Responsibility: Evidence From a Quasi-Natural Experiment in China (December 1, 2020). Available at SSRN: https://ssrn.com/abstract=3740396

Thomas J. Chemmanur (Contact Author)

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
Chestnut Hill, MA 02467-3808
United States
617-552-3980 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://https://www2.bc.edu/thomas-chemmanur/

Dequan Jiang

School of Economics and Management - Wuhan University ( email )

Wuhan
China

Weiping Li

Sun Yat-sen University ( email )

Guangzhou
China

Jeffrey A. Pittman

Memorial University ( email )

St. John's, Newfoundland A1B 3X5
Canada
709-737-3100 (Phone)
709-737-7680 (Fax)

Virginia Tech ( email )

United States

Zi-Tian Wang

Nanjing University ( email )

Nanjing, Jiangsu 210093
China

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