CSR and exposure to systemic risk: Building resilience in non-financial firms

By using a sample of non-financial listed Indian firms, we find that firms that spend more funds on Corporate Social Responsibility (CSR) observe a greater reduction in their exposure to systemic risk. The negative relationship between CSR spending and systemic risk persists even during the global financial crisis and COVID-19 pandemic periods. It is more pronounced for firms that are mandated to spend on CSR than those which are not. CSR reduces the exposure to systemic risk by improving the information quality, reducing the probability of default, and enhancing the firm valuation. Our study highlights the importance of integrating CSR into the policymaking, which is directed towards mitigating the systemic risk. It in turn would ensure financial stability and reduce crises in an economy.