Corporate Social Responsibility, Peer Effects, and Stock Price Crash Risk: Empirical Evidence From Chinese A-Share Listed Companies

Abstract

This study addresses a critical gap in the existing literature that predominantly examines corporate governance and market mechanisms as determinants of corporate social responsibility (CSR) while overlooking inter-firm interactions. By analyzing panel data from Chinese A-share listed companies (2011–2023) through a peer effect lens, we systematically investigate how peer firms’ CSR engagements influence focal firms’ CSR adoption and subsequent stock price crash risks. Our empirical results demonstrate a pronounced peer effect on CSR behavior that is particularly amplified by industry leaders’ CSR initiatives. Meanwhile, we uncover a central paradox: this same peer CSR engagement, while exhibiting positive spillover, significantly elevates stock price crash vulnerability, a counterintuitive finding that challenges conventional wisdom. Robustness checks employing alternative model specifications and subsample analyses confirm the stability of the results. To mitigate endogeneity concerns, we implement an instrumental variable approach using the density of religious institutions in firms’ headquarter cities as an exogenous CSR determinant. The persistent significance of our findings across methodologies underscores the dual-edged nature of CSR peer effects. This study provides novel insights for optimizing CSR implementation strategies and informs regulatory frameworks for sustainable capital market development. It also advocates policy interventions that guide industry leaders to standardize CSR practices and incentivize corporations to adopt value-driven CSR initiatives that reconcile social impact with strategic value creation.