Building trust after pollution emergency: a strategic perspective on corporate social responsibility

Ma, Yechi, Ding, Yibing, Wang, Zilong and Zhang, Wenjing (2023) Building trust after pollution emergency: a strategic perspective on corporate social responsibility. Energy Economics, 126, [106989]. (doi:10.1016/j.eneco.2023.106989).

Abstract

We use extreme regional pollution emergencies to provide new evidence regarding the motivations for corporate social responsibility (CSR). We document that local firms strategically improve CSR to build trust following pollution emergencies, and this is specifically true for highly polluting firms. Firms face different intensities of external pressure from their stakeholders. In particular, following pollution emergencies, political dependency, institutional investors and public monitoring are the main sources of stakeholder pressure and drivers of the increased CSR. We further find that firms that gain trust through CSR activities after pollution emergencies are rewarded. CSR serves as a buffer against financial constraints, financing distress and the negative profitability effect following emergencies. This study contributes to the CSR literature on trust-building-motivated CSR strategies.

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