Working Papers

Unwatched Corporate Social Responsibility: The Impact of Releasing Political Pressure (with Shusen Qi, Jieyu Zhou, and Teng Zhang)

• China’s “Rule 18” in 2013 mandated political officials to resign as independent directors from listed companies. We exploit this quasi-natural experiment to examine the long-term effects of political pressures on corporate social responsibility (CSR). Based on hand-collected data and difference-in-differences models, we find that firms’ CSR performance decreases after they are released from political pressures. The results suggest that while political pressures can increase CSR engagement, politically induced CSR is generally not persistent. We further reveal that politically induced CSR could turn into firms’ spontaneous behavior only when firms have stronger incentives to conduct CSR, when the strength of political pressures is moderate, and when firms have greater bargaining power against political pressure. Finally, we show that firms are more likely to discontinue CSR that is less lined up with their best self-interest and that CSR activities induced by political pressures are generally economically inefficient. Our research is among the first to provide evidence regarding the persistency of politically induced CSR activities. 

• AOM 2024