Author(s)

Baoqi Li, Xiaotian Zhang

Corresponding Author

Baoqi Li

ABSTRACT

In this paper, we analyze the impact of economic policy uncertainties on corporate social responsibility. Moreover, the method that we use is multiple linear regression. To quantify economic policy uncertainty and corporate social responsibility, we use the Baker economic policy uncertainty index (EPU) and the corporate social responsibility rating (CSR) as a proxy. After adding year and industry fixed effects, we get a significantly negative relationship between CSR and EPU. After adding more control variables, the result remains negative and significant. Then we do a series of robustness checks by adding lagged variables and multi-fixed effects. All of those results remain significant. Then we conduct heterogeneity analysis. We find that the state-owned-enterprises have a more negative correlation between EPU and CSR. In addition, those big four audit firms also have a higher negative correlation between EPU and CSR. Overall, we have sufficient evidence to show a negative correlation between economic policy uncertainties and corporate social responsibility. Therefore, if we want firms to bear more social responsibilities, one of the good approaches is to reduce the uncertainties on economic policies. For example, governments can implement more moderate and predictable fiscal and monetary policies.

KEYWORDS

Corporate Social responsibility, Ownership type, Economic policy uncertainty