Corporate social responsibility performance and litigation risk

Abstract

Litigation risk not only raises a company's operational costs but also can result in potential losses. This paper investigates the impact of corporate social responsibility (CSR) performance on litigation risk, using non-financial and non-insurance companies listed on the Shanghai and Shenzhen A-share markets as the research sample. The study's findings indicate that higher CSR performance effectively reduces litigation risk. Further analysis suggests that the reduction in litigation risk is achieved through the enhancement of corporate reputation. Group tests reveal that this mitigating effect of CSR performance on litigation risk is more significant in companies with low levels of internal control.