Seeing is believing? The impact of air pollution on corporate social responsibility

Abstract We study the impact of air pollution in the city in which a firm is located on its corporate social responsibility (CSR) activities. Our hypothesis suggests that when managers are personally exposed to bad air pollution, they feel the pain and push their firms to engage in more CSR activities. Leveraging recent announcements regarding air pollution in Chinese cities, we find evidence consistent with our “seeing is believing” hypothesis. The findings are robust to alternative metrics of CSR and air pollution and after accounting for endogeneity. Additional analysis suggests that the impact of air pollution on CSR is more salient for firms with disproportionately older, female, and highly educated managers as well as when the local city government has more stable resources or when media coverage of air pollution increases.