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

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.