Impact of CSR on stock return resilience during the 2020 public health emergency: Evidence from the Chinese financial market

Abstract

Corporate Social Responsibility (CSR) can enhance firm value through non-profit channels, but it may also divert operational resources, potentially harming short-term financial performance. A key question in the literature is whether CSR can improve stock return resilience during negative shocks. Drawing on stakeholder theory, we hypothesize that CSR investment enhances stock resilience, though the effect may vary among firms. This paper analyzes financial data from 3153 Chinese listed companies alongside CSR ratings from the Hexun CSR database. Our findings indicate that firms with higher pre-event CSR ratings demonstrated stronger stock performance during the early stages of the public health emergency in 2020. These results remain robust across various checks and are supported by two instrumental variable approaches: local Confucian cultural influence and Lewbel's heteroskedasticity instrument. We further investigate the factors influencing the effectiveness of CSR in protecting firm value, revealing that CSR activities focused on shareholder responsibility are particularly effective. This protective effect is most pronounced in firms facing poorer financial conditions, lower proportions of institutional investors, heightened industrial competition, and those not operating in socially sensitive industries. Overall, our findings provide evidence that active engagement in CSR can enhance a company's resilience to negative shocks during global health crises.