Natural disasters and CSR: Evidence from China

Using detailed natural disaster data and a sample of Chinese listed firms over the period 2011-2019, we examine the link between natural disasters and firms' corporate social responsibility (CSR) performance. We find that both the presence of a severe natural disaster and the number of disaster categories are significantly associated with higher CSR activities in the affected area. Next, we explore why firms are motivated to increase their CSR engagement in the disaster area. Our empirical evidence shows that state ownership, political connections, and institutional ownership are the main driving forces that spur CSR activities in the disaster area. Moreover, large firms and firms with high financial constraints are more motivated to increase their immediate CSR activities following natural disasters. We also find that CSR activities during the disaster period reward firms with better future accounting and stock market performance than those in the non-disaster period. Overall, our findings suggest that state ownership, political connections, institutional ownership, and future firm performance create incentives for firms to enhance CSR investments following natural disasters.

Automated summary

This study examines the relationship between natural disasters and firms' corporate social responsibility (CSR) performance, using detailed data on natural disasters and a sample of Chinese listed firms. The findings suggest that severe natural disasters and the number of disaster categories are significantly associated with higher CSR activities in the affected area. State ownership, political connections, and institutional ownership are identified as the main driving forces behind increased CSR engagement in the disaster area.