From Corporate Social Responsibility to Stock Price Crash Risk: Modelling the Mediating Role of Firm Performance in an Emerging Market

Cao Thi Mien Thuy,Trinh Quoc Trung,Nguyen Thanh Liem,Nguyen Vinh Khuong

doi:10.3390/su132212557

Abstract

The literature on the link between corporate social responsibility (CSR) disclosure and stock price crash risk suggests that it is far more complicated than a plain one-to-one relationship. In this study, we examine how CSR disclosure affects the stock price crash risk and whether firm performance acts as a mediating variable in this relationship. The CSR disclosure index is built using the content analysis technique and the GRI criteria. We choose 225 businesses in Vietnam, comprising 159 firms listed on HOSE and 66 firms listed on HNX. Using the techniques of OLS, LOGIT, GMM, and the Sobel test and replacing different measures of dependent and mediator variable to enhance the robustness of our findings, we reach two important results. To begin with, CSR disclosure has a negative influence on the stock price crash risk of Vietnam’s listed firms. Second, in the aforementioned relationship, firm performance serves as an intermediate. Our results imply that listed firms should engage in CSR practices and disclosure in order to raise the firm’s performance and lower the stock price crash risk.

Highlights

The main focus of this study was on whether corporate social responsibility (CSR) disclosure affects stock price crash risk and whether firm performance acts as a mediator in this relationship
Prior research attempted to establish a link between CSR disclosure and stock price crash risk
The study’s goal was to investigate the influence of CSR disclosure on stock price crash risk and determine whether firm performance works as a mediating variable in this relationship

Summary

Introduction

Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations. Corporate social responsibility has been a topical issue for academics, regulatory bodies and businesses in recent years. The goal of this study is to investigate whether. CSR disclosure may provide advantages to firms or whether it is only a tool for business managers to engage in self-seeking conduct. If the goal of CSR disclosure is to benefit a firm’s shareholders and stakeholders, the firm should be encouraged to engage in CSR and publish information about its efforts. Managers who utilize CSR disclosure for self-interest may, on the other hand, exacerbate asymmetric information by withholding bad news while promptly disclosing positive news [1]. When bad news accumulates to a certain level, it is likely to be broadcast to outside investors altogether, leading to a sharp and abnormally significant price drop known as a stock price crash [2,3,4,5]

Objectives

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Results

Conclusion