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Great Chinese famine, corporate social responsibility and firm value

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  • Xu, Cheng
  • Gao, Jun
  • Liu, Xinghe
  • Sun, Yanqi
  • Koedijk, Kees G.

Abstract

We conceptualize that CEOs who endure traumatic experiences stemming from man-made disasters practice less corporate social responsibility. We exploit a natural experiment—the Great Chinese Famine—to empirically test this hypothesis. We find that (i) firms with CEOs who experienced the Great Chinese Famine score lower in corporate social responsibility ratings than a comparison group; (ii) this relationship is mainly driven by prosocial practices tied to employee relations, environmental protection, supplier relations, and community contributions; and (iii) this negative relationship is more pronounced in firms whose CEOs were younger when they experienced the famine, (iv) the positive relationship between CSR scores and firm value is more pronounced in firms with CEO without famine experiences. These results are robust in the face of several sources of endogeneity. Our study contributes to ongoing research regarding how top executives' early experiences affect their managerial decisions. It also enriches work surrounding corporate social responsibility and the plausibly exogenous determinants of prosocial preferences.

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  • Xu, Cheng & Gao, Jun & Liu, Xinghe & Sun, Yanqi & Koedijk, Kees G., 2023. "Great Chinese famine, corporate social responsibility and firm value," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:pacfin:v:79:y:2023:i:c:s0927538x23000768
    DOI: 10.1016/j.pacfin.2023.102010
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    Cited by:

    1. Liu, Yang & Zhang, Han & Zhang, Fukang, 2023. "CEO's poverty imprints and corporate financial fraud: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 81(C).
    2. Zhaocheng Xu, 2023. "CEOs’ early famine experience, managerial discretion and corporate social responsibility," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-13, December.
    3. Yang Liu & Han Zhang & Fukang Zhang, 2024. "The power of CEO growing up in poverty: Enabling better corporate environmental, social, and governance (ESG) performance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(3), pages 1610-1633, May.
    4. Zhang, Zihan & Kim, Jun Hyung, 2023. "The Inheritance of Historical Trauma: Intergenerational Effects of Early-Life Exposure to Famine on Mental Health," IZA Discussion Papers 16385, Institute of Labor Economics (IZA).

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