Has corporate involvement in government-initiated corporate social responsibility activities increased corporate value? —Evidence from China's Targeted Poverty Alleviation

The study examines whether corporate participation in government-initiated CSR—specifically China’s Targeted Poverty Alleviation (TPA) program—enhances corporate value, and whether it does so more than traditional, corporate-initiated CSR. It contextualizes TPA as a government-led, semi-compulsory initiative with dual attributes of public welfare and policy compliance. The research addresses three core hypotheses: H1: Participation in government-initiated CSR (TPA) improves corporate value. H2: Government-initiated CSR increases corporate value more than corporate-initiated CSR. H3: Penetrative “integrated poverty alleviation” (e.g., industrial development, education) enhances corporate value more than direct “donative poverty alleviation” (e.g., donations). Motivated by Signal Transmission Theory, Reputational Capital Theory, Stakeholder Theory, and Resource Dependence Theory, the paper posits that TPA participation signals firm strength, improves reputation, attracts institutional investors, and yields political resources (subsidies, tax incentives), thereby boosting value.

Prior CSR literature documents mixed effects of CSR on financial performance, with some studies reporting positive associations, others finding negative short-term impacts, and some suggesting bidirectional relationships. Mechanism-focused work highlights roles for reputational capital and social capital in linking CSR to corporate value. Research on government-initiated CSR in China (TPA) indicates potential benefits through improved reputation, mitigation of negative perceptions, competitive advantages, and market opportunities (e.g., microfinance, industrial development). However, comparative evidence on government-initiated versus corporate-initiated CSR is limited, and the pathways through which TPA affects firm value are underexplored. This paper fills these gaps by contrasting the value effects of government-initiated CSR with corporate-initiated CSR and by testing mechanisms involving institutional investor attention, government subsidies, and corporate reputation within the Chinese TPA context.

Data: Listed Chinese firms from 2013–2018. TPA data (2016–2018) were manually collected from annual and CSR reports; financial and control variables came from CSMAR. Financials/insurance firms and ST/*ST firms were excluded. Continuous variables were winsorized at 1% tails. Final panel: 12,325 firm-year observations (treatment group: 2,722; control group: 9,603). Descriptives show rising TPA engagement and inputs from 2016–2018, with total TPA donations around $9.1 billion and about 200,000 people lifted from poverty. Empirical strategy: A Differences-in-Differences (DID) design exploits the 2016 CSRC Opinion as the policy shock. The main model regresses next-year firm value (Tobin’s Q; ROA) on Treatment×Post, firm and year/industry fixed effects, and controls (Idr, Grow, Lev, Ctr, Ocf, Mb, Age, Size, Analysts, State, Big4, Charity_ln). Treatment is indicated by TPA participation (Treatment1), monetary TPA donations (Treatment2), and resource TPA donations (Treatment3). H2 is tested by augmenting DID with Vcsr (voluntary CSR report disclosure) and comparing standardized coefficients of Treatment×Post vs Vcsr. H3 is tested using a specification that enters specific TPA modes (industrial development, education, employment transfer, healthcare, ecological protection, basic living standards) simultaneously to identify which integrated modes drive value (industrial development and education proxy “penetrative” approaches). Robustness: PSM+DID (nearest neighbor and radius matching on baseline controls), alternative treatment focusing on industrial development (Treatment4), exclusion of 2016 observations, controlling for province fixed effects, and a Heckman two-stage model addressing self-selection using industry-year average TPA intensity (Tpa_mean) as an exclusion restriction. Mechanism (Mediation) tests: Three mediators are examined via a mediating effect framework—(i) institutional investor shareholding (Ins), (ii) government subsidies scaled by revenue (Subsidy; hand-collected), and (iii) corporate reputation (Rep; factor-based score from 12 reputation criteria, binned into deciles). Paths a, b, and c are estimated to assess partial/full mediation. Heterogeneity: Triple interactions examine moderation by (i) property rights (State), (ii) product market competition (HHI), and (iii) regional marketization (MarketScore from the China Marketization Index). Additional analysis considers CSR willingness using CSR report tone (Tone) extracted via Chinese text analysis to proxy strength of corporate-initiated CSR.

• Participation in TPA increases corporate value: DID baseline shows positive, significant effects of Treatment1×Post on Tobin’s Q (approximately 0.488–0.544; t-stats around 9–10) and ROA (about 0.011–0.013), controlling for firm, industry, and year effects. - Robustness: PSM+DID confirms positive Treatment1×Post effects; restricting to industrial development (Treatment4×Post) yields a significant positive coefficient (~0.562). Dropping 2016, and adding province fixed effects, preserves significance and magnitude. Heckman two-stage estimates also show a significant positive relationship after correcting for selection. - Government-initiated vs corporate-initiated CSR (H2): Standardized coefficient comparisons indicate Treatment×Post has a larger positive impact on corporate value than Vcsr. CSR tone analysis further shows firms with low CSR willingness experience a significant increase in mean TQ from 1.601 before TPA to 2.014 after TPA. - Integrated vs donative TPA (H3): Penetrative “integrated” modes (industrial development and education) exhibit the strongest positive associations with firm value when entered jointly with other TPA modes. - Mechanisms (mediation): TPA increases institutional investor ownership (Ins) and government subsidies (Subsidy), and improves corporate reputation (Rep). In mediation models, Ins, Subsidy, and Rep each partially mediate the TPA–value link: Treatment1×Post remains significant alongside each mediator, and mediators significantly predict higher TQ. - Heterogeneity: Effects are stronger for state-owned enterprises (Treatment1×Post×State ≈ 0.281, significant), in less competitive industries (higher HHI; Treatment1×Post×HHI positive and significant), and in regions with higher marketization (Treatment1×Post×MarketScore positive and significant). - Descriptive insights: From 2016 to 2018, the share of firms donating monetarily rose from 16.86% to 27.28%, and donating resources from 8.00% to 12.04%. Average total TPA inputs (10,000s RMB) increased (e.g., from 1,116.5 in 2016 to 2,262.9 in 2018), and the average number of people lifted from poverty per firm also rose (e.g., 654 in 2016 to 984 in 2018). Overall, listed firms contributed about $9.1 billion and helped roughly 200,000 people exit poverty over three years.

Findings support the hypotheses that government-initiated CSR through TPA enhances firm value and does so more than corporate-initiated CSR. The evidence suggests TPA participation serves as a credible positive signal of firm strength and commitment, attracts institutional investors who provide monitoring and support, improves corporate reputation and stakeholder relations, and unlocks valuable political resources such as subsidies and tax incentives. Integrated approaches (industrial development, education) that embed poverty alleviation into business operations create synergies between social impact and economic benefits, thereby delivering larger value gains than simple donations. The value impact is context-dependent: benefits are amplified for SOEs (closer government ties), in industries with lower competitive intensity (more slack and market power), and in regions with better market institutions (less intervention and stronger policy support). These results reconcile prior mixed CSR–performance findings by highlighting policy-driven CSR contexts and concrete mediating channels.

This paper documents that corporate participation in China’s government-initiated TPA program significantly increases corporate value, outperforming corporate-initiated CSR activities. Integrated forms of TPA (industrial development and education) yield the strongest value gains. Mechanism tests reveal partial mediation via higher institutional investor ownership, increased government subsidies, and improved reputation. Effects are more pronounced in SOEs, less competitive industries, and regions with higher marketization. The study enriches CSR and corporate value literature by focusing on a government-led CSR context and clarifies when and how CSR generates value. Policy implications include incentivizing and recognizing firms that undertake integrated TPA, aligning resource allocation (subsidies, tax incentives) to sustain corporate engagement, and leveraging market institutions to amplify value creation. Future research could generalize these findings beyond China, explore long-run post-2020 dynamics, and examine micro-level operational channels within integrated TPA projects.