AAA Spark Meeting of Regions

Corporate Social Responsibility as a Defense Against Air-Pollution-Driven Brain Drain: Evidence from China

• In Event: CsR

Abstract

We connect corporate social responsibility (CSR) to important but often neglected labor market outcomes: air-pollution-driven employee attrition and labor costs. Using satellite-based measures of PM2.5 levels as a proxy for ambient air pollution, we find that Chinese firms affected by air pollution experience increased employee attrition, especially attrition of skilled labor. Such firms increase rank-and-file employee remuneration, as measured by firm-wide total and average labor costs. We also find that CSR activities and related high-quality disclosures reduce air-pollution-driven employee attrition and labor costs. However, firms that have their CSR disclosures decoupled from the actual CSR practices, by issuing excessively optimistic, pessimistic, ambiguous, or lengthy CSR reports, experience more adverse labor outcomes driven by air pollution. Thus, while CSR serves as a defense against air-pollution-driven brain drain, our findings suggest that employees can discern firms’ opportunistic disclosure from the actual CSR practices.

Authors

• Xingqiang Du, Xiamen University

• Feng Chen, University of Toronto - Rotman School of Managemen

• Chunyan Wei, peking university

• Jianguang Zeng, Chongqing University