Balancing acts: The relationship between corporate environmental irresponsibility, charitable donations, and financial performance

Abstract

AbstractThis study examines the practices of listed firms in heavily polluting industries in China and their approaches to corporate social responsibility. Specifically, it explores the relationship between corporate environmental irresponsibility (CEIR), charitable donations (CD), and financial performance. A sample of Chinese A‐share listed firms in heavily polluting industries from 2012 to 2019 is used to empirically test this relationship. The results show that CEIR has a penalty effect on financial performance; firms with higher levels of environmental irresponsibility experience poorer financial performance. However, CD can mitigate this negative impact. This paper sheds light on the underlying motivations of firms neglecting their environmental responsibilities while being diligent in charitable activity. It provides theoretical foundation and policy recommendations for addressing imbalances in corporate social responsibility based on whether firms can offset environmental shortcomings through charitable acts.