Corruption and CSR: New Evidence from China’s Anti-Corruption Campaign

Abstract

The general intuition is that corporate corruption, as a violation of legal and ethical principles, is contrary to corporate social responsibility (CSR), which signifies firms’ willingness to do the right things. However, we find evidence of the opposite in China—corruption positively influences CSR performance. Using a difference-in-differences model that exploits China’s 2012 anti-corruption campaign as a shock, we find that an exogenous decrease in corruption leads to a reduction in CSR performance. Further triple difference estimations suggest that the reduction in CSR performance is more pronounced when firms have high-political-ranking and high-compensated managers. We offer novel evidence that CSR in China is a window-dressing tool to mask corruption.