Public Listing and Corporate Social Responsibility from a Sustainability Risk Management Perspective

Abstract

The current global economic development faces social and environmental challenges, such as climate change and environmental pollution, which requires firms to be more socially responsible. Due to the fast-growing corporate social responsibility (CSR) consciousness and concerns of individual investors in the stock market, the newly listed firms are likely to face greater legitimacy pressure from stakeholders in China. This institutional environment is quite suitable to explore how public listing influences firms' CSR performance and its potential mechanism. Using a sample of Chinese IPO firms for the years 2012-2016 and a multiple regression model controlling firm fixed effect and time fixed effect, we find that there is a significant and sustained increase in CSR performance after IPO. Further analyses also show that this increase in CSR performance is more pronounced in heavily polluting industries, especially at firms that are covered by more securities analysts, and more media. Overall, these findings suggest that CSR can be served as an instrument to manage sustainable development risk for IPO firms to meet the social and environmental expectations of various stakeholders. By highlighting the prominent role that public listing plays in firms’ CSR decisions, this study draws the regulator’s attention to promoting sustainable economic development in other developing countries like China, which lack mature CSR culture and institutional environment.