Inhibiting or promoting: The impact of corporate social responsibility on corporate financialization

In the weave of global financialization, China has shifted its economic domain from the real economy to the fictitious economy. In this transformation, the impact of corporate social responsibility (CSR) on corporate financialization remains unrevealed. Explicitly, does CSR play a governance role and inhibit corporate financialization with "information effect", or play an agency role and promote it with "reputation insurance effect"? Using a sample of Chinese nonfinancial listed companies from 2010 to 2020, this paper empirically examines the impact of CSR on corporate financialization. The results show that CSR plays an agency role in strengthening management self-interest, exerting positive impact on corporate financialization significantly. Further, we find that financialization will crowd out corporate entity investment and worsen their business performance in future. In particular, the financialization effect of CSR in non-SOEs and companies with decentralized equity and declining performance are quite remarkable. In summary, this paper expands the research on the economic consequences of CSR and the factors influencing corporate financialization. The results are of significance in understanding the relationship between CSR and corporate financialization, standardizing the disclosure of CSR, as well as providing inspiration for policy-makers to guide the capital back to the real economy.