As the core of sustainable development strategy, corporate social responsibility (CSR) is a concept that influences business missions, management, operations, finance, and marketing. Studies of the economic consequences of CSR have focused on the theoretical and practical arenas. However, few studies have examined the impact of CSR on the market price fluctuations of company shares. The purpose of this study was to investigate the effect of CSR on stock price crash risk and its relationship with the role of internal controls in China. After empirical analysis, we found a significantly negative association between CSR and stock price crash risk. Furthermore, we determined that internal controls play a significant and partially mediating role between CSR and stock price crash risk. Internal controls have become an important system for Chinese companies to improve their social responsibility and reduce their operating risk, especially the risk of a stock price crash. We also found that internal controls had a significant and partial moderating effect on the relationship between CSR and stock price crash risk. In certain environments with higher levels of internal controls, CSR prominently reduced the risk of stock price crash. In theory, our study adds to the growing literature about CSR, expands the scope of CSR research, elaborates upon relevant CSR economic consequences, and complements the literature about the determinants of stock price crash risk. In practice, our conclusions provide a reference for Chinese managers, investors, and the related government departments to evaluate the effects of CSR and internal controls, and provides regulators with a method to help control abnormal fluctuations in the stock market. More importantly, the results of this study have reference value for scholars and practitioners in developing countries like China.

Regarding the relationship between CEO power and firm risk, contradictory views can be deduced from managerial power theory and organization theory. This study tries to reconcile these contradictions by delving into the differences in the types of CEO power. Using a sample of Chinese listed companies, we find that the formal power CEOs derive from ownership has a positive relationship with firm risk, but CEOs’ informal power that originates from expertise is negatively associated with firm risk. Furthermore, CSR is verified as a mediator in the relationship.

This article reports an empirical study suggesting that environmental violations generally have a negative influence on the level of loans that the violating firms hold in China and that after a violation announcement involving waste water discharge, firms are forced to take secured loans. These effects are found to be mitigated for state-owned firms and the media coverage of a certain violation event has a negative effect on the level of loans that firms obtain. Our work presents the evidence of a penalty mechanism in the credit market that fines firms for their environmental violations in a transition economy, and has some implications for business management and governmental policy.