Flattering the government: negative reports by state-controlled media and CSR

Abstract

PurposeThe purpose of this study is to investigate whether negative reports by state-controlled media affect firms’ CSR performance. Negative reports by state-controlled media indicate the signals of deteriorating relationships between firms and the government and then generate greater political pressure on firms, which may force firms to engage in more CSR activities. This study first examines the influence of negative reports by state-controlled media on CSR performance. Then, we further figure out whether the degree of dependence on the government exhibits an impact on the relationship between negative reports by state-controlled media and firms’ CSR performance.Design/methodology/approachThe sample for this study is based on all Chinese A-listed firms from 2010 to 2020. The study employs CSR scores data released by HEXUN to measure firms’ CSR performance. HEXUN is one of the most professional institutions that sell CSR-related products. Following You et al. (2018) and An et al. (2022), the authors identify the nine most popular media consisting of state-controlled media. The ordinary least squares (OLS) method is adopted for regression, and various robustness tests are conducted including using alternative measures, expanding the regression model and instrumental variable method.FindingsThe empirical results show a significant positive relationship between negative reports by state-controlled media and firms’ CSR performance. The cross-sectional analyses indicate that the effect of negative reports by state-controlled media on firms’ CSR performance is stronger for firms with mandatory CSR disclosure requirements, firms with political connections and firms with more severe financial constraints. Furthermore, improved CSR performance resulting from negative reports by state-controlled media indeed helps repair firms’ relationship with the government and thus leads them to attain government benefits, such as more government subsidies and lower tax rates.Research limitations/implicationsThis study finds that media reports issued by state-controlled media can be treated as signals of the relationships between firms and the government, which generate political pressure to push firms to take CSR as a strategic management tool to repair their relationships with the government. It helps policymakers and investors more comprehensively understand firms’ incentives behind their improved CSR performance and develop more effective policies. This study focuses on firms’ overall CSR performance. We anticipate that future research can extend the analysis of the impact of negative reports by state-controlled media on specific aspects of CSR investment.Originality/valueThis study illustrates the significantly positive effect of negative reports by state-controlled media in promoting CSR performance. It fills the research gap in studying the role of state-controlled media in CSR, especially for emerging markets. Moreover, the study also contributes to the strand of literature on strategic CSR management.