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Sociopolitical activity and corporate default risk: Evidence from the targeted poverty alleviation program in China

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  • Wang, Ziqiao
  • Zhang, Wei
  • Zhang, Xiaotao

Abstract

This study examines the impact of corporate sociopolitical activity on firm-level default risk under the unique setting of China's Targeted Poverty Alleviation (TPA) program. We show that firms participating in the TPA program exhibit lower default risk compared to those that do not participate. This impact is more pronounced among firms with greater media endorsement, higher attention from market participants, and stronger corporate governance. Additionally, we find that TPA participation leads to concurrent reductions in both market-based and accounting-based risks. These findings enrich the non-market strategy literature by emphasizing the economic benefits of aligning the objectives of Corporate Social Responsibility (CSR) and Corporate Political Activity (CPA) to improve corporate risk management.

Suggested Citation

  • Wang, Ziqiao & Zhang, Wei & Zhang, Xiaotao, 2024. "Sociopolitical activity and corporate default risk: Evidence from the targeted poverty alleviation program in China," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    • Handle: RePEc:eee:finana:v:96:y:2024:i:pa:s1057521924004939
    DOI: 10.1016/j.irfa.2024.103561
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    More about this item

    Keywords

    Targeted poverty alleviation; Non-market strategy; Default risk; Corporate social responsibility; Corporate political activity;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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