How does corporate social irresponsibility affect transaction costs? Evidence from China

Abstract

Corporate social irresponsibility (CSIR) scandals frequently reported in China, which has a huge impact on enterprises and even society. This paper examines the effect of CSIR on the transaction cost of Chinese private enterprises by focusing on the irresponsible behavior of enterprises. By introducing listed companies, crisis management capacity, we further studied whether CSIR behaviors of enterprises with high visibility bring higher costs, and how enterprises reduce the impact of CSIR on transaction costs under the unique institutional environment of China. Based on data from the 2018 National Survey of Private Entrepreneurs Survey, we found that CSIR increases the transaction cost for firms, especially in listed companies. Moreover, crisis management capacity plays a moderating role in reducing the threat. The conclusion of this study contributes to the understanding of CSIR behavior and its influencing mechanism, as well as the sustainable development strategy of enterprises.