Do corporate bond defaults affect the corporate social responsibility performance of non-defaulting industry peers? Evidence of credit risk contagion from China

Abstract

ABSTRACT Using Chinese A-share listed firms from 2014 to 2020 as samples, this study investigates the impact of corporate bond defaults on the corporate social responsibility (CSR) performance of non-defaulting industry peers from the perspective of the credit risk contagion effect. The findings show that corporate bond defaults hinder the CSR performance of non-defaulting industry peers. The mechanism test shows that the risk contagion caused by corporate bond defaults lowers the financing and operational capabilities of peer firms, thereby weakening the CSR performance. Furthermore, the inhibitory effect of corporate bond defaults on the CSR performance of other firms in the industry is more significantly evidenced in non-state-owned enterprises, regions with a low degree of marketization, as well as firms with a high degree of financing constraints or a low degree of financing demand.