CSR performance and firm idiosyncratic risk in a data-rich environment: The role of retail investor attention

He, Feng; Liu, Guanchun; Hao, Jing; Li, Youwei

Abstract

In the Chinese stock market, there are many retail investors who focus on short-term profits and may consider corporate social responsibility (CSR) differently from institutional investors. We find that CSR significantly reduces firms’ idiosyncratic risk in the Chinese financial market. This result still holds after a series of robustness checks with potential endogeneity concerns. We further test the role of CSR as a nonfinancial informational supplement, the interplay of CSR with stock analyst forecasts and the effect of heterogeneity in corporate governance characteristics. Finally, we find that retail investors’ attention mediates the relationship between CSR and firms’ idiosyncratic risk. Our results have general implications for understanding the impact of CSR on retail investors.

Citation

He, F., Liu, G., Hao, J., & Li, Y. (2023). CSR performance and firm idiosyncratic risk in a data-rich environment: The role of retail investor attention. Journal of International Financial Markets, Institutions and Money, 89, Article 101877. https://doi.org/10.1016/j.intfin.2023.101877

• Journal Article Type: Article
• Acceptance Date: Oct 19, 2023
• Online Publication Date: Oct 21, 2023
• Publication Date: Dec 1, 2023
• Deposit Date: Oct 22, 2023
• Publicly Available Date: Oct 22, 2024
• Journal: Journal of International Financial Markets, Institutions and Money
• Print ISSN: 1042-4431
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 89
• Article Number: 101877
• DOI: https://doi.org/10.1016/j.intfin.2023.101877
• Keywords: Economics and Econometrics; Finance
• Public URL: https://hull-repository.worktribe.com/output/4422956