The Relationship Between Corporate Social Responsibility and Stock Price Crash Risk: The Moderating Roles of Regulatory Mechanisms and Information Asymmetry

Document Type : Research Paper

Authors

Department of Accounting, Faculty of Management and Accounting, Allameh Tabataba'i University, Tehran, Iran.

Abstract

Objective: This study investigates the relationship between corporate social responsibility (CSR) and stock price crash risk, with particular emphasis on the moderating roles of regulatory mechanisms—including institutional ownership and internal control quality—and information asymmetry. Stock price crash risk remains a major concern for investors, corporate managers, analysts, and regulators, as it reflects the sudden release of accumulated negative information and can severely affect capital market stability. Understanding the factors that influence this risk provides valuable insights for stakeholders in assessing and predicting future stock price crashes.
 
Method: The statistical sample was selected using a systematic elimination procedure. Based on predefined screening criteria, 125 companies listed on the Tehran Stock Exchange were included in the final sample. The research hypotheses were tested using panel data regression models.
 
Results: The findings indicate that corporate social responsibility significantly reduces stock price crash risk. In addition, regulatory mechanisms, including institutional ownership and internal control quality, significantly weaken the negative relationship between CSR and stock price crash risk, suggesting that these governance mechanisms partially substitute for the monitoring role of CSR. However, information asymmetry does not have a significant moderating effect on the relationship between CSR and stock price crash risk.
 
Conclusion: The results suggest that when corporate social responsibility is implemented as a genuine governance and accountability mechanism rather than a tool for managerial self-interest, it effectively reduces stock price crash risk by enhancing transparency and reducing information opacity. Institutional ownership and strong internal control systems further strengthen corporate governance and improve financial reporting quality, thereby reducing the incremental role of CSR in mitigating crash risk. Although information asymmetry is generally associated with a higher likelihood of stock price crashes by enabling managers to conceal unfavorable information, it does not significantly moderate the relationship between CSR and stock price crash risk. Overall, the findings highlight the complementary roles of CSR and corporate governance mechanisms in enhancing market transparency and reducing stock price crash risk.

Keywords

Main Subjects

References

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History

  • Receive Date: 25 November 2024
  • Revise Date: 05 April 2025
  • Accept Date: 22 July 2025

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