Corporate social responsibility dimensions and stock price crash risk: Evidence from the management's self-interest perspective

Abstract

This paper adopts the lens of management's self-interest motives to explore the potential influence of corporate social responsibility (CSR) and its distinct dimensions on the risk of stock price crashes. Our findings reveal that CSR performance can effectively reduce the likelihood of future stock price crashes. Notably, the principal source of this risk mitigation stems from the dimensions of environmental responsibility and stakeholder responsibility, while the dimension of social responsibility does not exhibit a statistically significant effect on this phenomenon. We further find undervalued companies are able to benefit more from CSR and its various dimensions in terms of crash risk mitigation. Finally, we adopt the difference-in-difference test to discern the underlying mechanisms. Our research highlights that CSR, particularly environmental responsibility and stakeholder responsibility, contributes to the reduction of inefficient investments, deters management from selling shares, and curbs online platform manipulation, ultimately leading to a decreased risk of stock price crashes.