Subjective perception of economic policy uncertainty and corporate social responsibility: Evidence from China

While existing literature explores factors affecting corporate social responsibility (CSR) from various perspectives, the role of economic policy uncertainty perception has never been studied to our knowledge. In this paper, we study the effect of Chinese firms' subjective perception of economic policy uncertainty (SEPU) on their CSR engagement. Our model proves that SEPU reduces the benefits of maintaining relationships between shareholders and stakeholders, thus decreases corporate CSR engagement. This negative relationship is more pronounced for firms that are highly influenced by the government. We empirically examine these two predictions using the sample of Chinese A-share listed companies. We address endogenous concerns by using the US-China trade war as an exogenous uncertainty shock, and including a Bartik instrumental variable.