Economic policy uncertainty and corporate social responsibility performance: evidence from China

Purpose - The purpose of this paper is to show how the external issue of economic policy uncertainty (EPU) affects enterprises' corporate social responsibility (CSR). Design/methodology/approach - This study investigates the relationship between EPU and CSR based on the Chinese capital market from 2010 to 2018. Following the most recent studies focused on economic policy uncertainty, this paper uses the news-based method proposed by Baker et al. (2016) to measure EPU and explore the effect of EPU on CSR, as well as the mediating role of state ownership in such a relationship. Findings - Empirical results show that increasing EPU will restrain enterprises' social responsibility behaviour and the inhibitory effect is more obvious for state-owned enterprises. Further analyses reveal that the inhibitory effect of EPU on CSR is stronger for enterprises that face severe financial constraints and is significant for various components of CSR, and trade policy uncertainty could also curb enterprises' social responsibility behaviour. Practical implications - As a stable economic environment is important for enterprises' CSR engagement, the present study's conclusions can help policymakers better understand the implications of policy stability for enterprises' financial and non-financial decisions and especially their CSR decisions. Social implications - With the increasing attention paid to the CSR of enterprises, this study provides evidence that enterprises should develop appropriate CSR strategies according to the economic policy environment and enhance their capacity to withstand the risks generated by EPU. Originality/value - To the best of the author's knowledge, this study is the first to analyse the relationship between EPU and CSR. The results contribute to a better understanding of what issues influence enterprises' CSR engagement, highlighting the importance of a stable economic policy environment and of enterprises' ability to withstand risks.