Can Better Judicial Quality Decrease CSR Decoupling? A Quasi-natural Experiment Based on Circuit Court Establishment

Huang Siqi; Mai Yong; Yan Jingrui

doi:doi:10.16538/j.cnki.fem.20230326.203

Summary

This paper presents circuit court establishment as a quasi-natural experiment in judicial quality improvement. Based on the research samples of Chinese A-share listed companies from 2010 to 2020, this study evaluates the potential impact of circuit court establishment on CSR decoupling. It is found that circuit court establishment can significantly decrease CSR decoupling, and the conclusion remains significant after a series of robustness tests. Heterogeneity analysis shows that the decreasing effect of circuit court establishment on CSR decoupling is more significant in areas with better legal environment and non-CSR-sensitive industries. The mechanism test shows that circuit court establishment decreases CSR decoupling through the deterrence effect, regional peer effect, and governance effect. Further analysis shows that circuit court establishment is conducive to decreasing strategic CSR decoupling, but has no significant effect on reactive CSR decoupling. In addition, the economic consequence test shows that better judicial quality improves firm investment efficiency by decreasing CSR decoupling. This paper expands the existing literature on the factors influencing CSR decoupling from a formal institutional perspective. The study provides theoretical support for the reform of China’s judicial system in a deeper way.