Financial crime and corporate social responsibility: Evidence from China

This study uses criminal first-instance judgments of financial crimes published by China Judgments Online to construct an index of a city’s financial crime rate, focusing on the impact of financial crimes on corporate social responsibility (CSR). The higher the financial crime rate in a city where the firm is located is, the worse the firm’s CSR performance. The main reason for this phenomenon is that a higher city financial crime rate increases information asymmetry, intensifies financing constraints, and depresses investor sentiment. In addition, crimes that disrupt the management order of financial bills, deposits, and loans, as well as moderately severe financial crimes, have the greatest economic effects on CSR; internal and external corporate pressures play an important moderating role, reinforcing the impact of financial crime; and financial crime can damage corporate reputation through its impact on CSR.