Title: Corporate social responsibility and stock price crash risk: the mediating effect of accounting conservatism

Authors: Emna Brahem; Florence Depoers; Faten Lakhal; Assil Guizani

Addresses: Centre d' Etudes et de Recherches sur les Organisations et la Stratégie CEROS, Université Paris Nanterre, France; LAMIDED, Université de Sousse, ISG de Sousse, Tunisia ' Centre d' Etudes et de Recherches sur les Organisations et la Stratégie CEROS, Université Paris Nanterre, France ' Léonard de Vinci Pôle Universitaire, Research Centre, 92916 Paris La Défense, France; IRG, Université Paris-Est., France ' EDC Paris Business School, OCRE Research Lab, Paris, France

Abstract: The purpose of this paper is to investigate the effect of corporate social responsibility (CSR) on the firm-specific stock price crash risk. It also examines how this effect is driven through accounting conservatism. Based on a sample of French-listed firms from the period 2007 to 2016, the authors use GLS regression models on panel data estimated with robust standard errors, clustered at the firm level. The results show that firms' CSR performance is negatively associated with stock price crash risk. These findings suggest that socially responsible firms are less likely to hide bad news and poor performance to comply with stakeholders' ethical expectations, which reduces the stock price crash risk. Furthermore, we find that CSR indirectly decreases the stock price crash risk by enhancing accounting conservatism. This result suggests that accounting conservatism is a channel through which CSR decreases stock price crash risk. Our results provide practical implications for policymakers about the necessity to increase CSR activities as a good corporate governance device.

Keywords: corporate social responsibility; CSR; stock price crash risk; accounting conservatism; mediating role.

DOI: 10.1504/IJBGE.2024.141809

International Journal of Business Governance and Ethics, 2024 Vol.18 No.6, pp.651 - 677

Received: 29 Jun 2022
Accepted: 22 Jan 2023
Published online: 02 Oct 2024 *

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