Ethnic Diversity, Trust and Corporate Social Responsibility: The Moderating Effects of Marketization and Language

While the effect of culture on finance and management has been well documented in the literature, it is unclear whether and by which channel(s) ethnic diversity affects corporate social responsibility (CSR). Integrating social identity theory and neo-institutional theory, we investigate the ethnic diversity–CSR relation and explore potential mechanisms and boundary conditions. Based on the distribution of ethnic groups across different regions in China, We find that ethnic diversity negatively affects firms’ CSR performance. We document that social trust mediates the negative ethnic diversity–CSR relationship, and linguistic diversity strengthens and marketization mitigates this relation. The results are robust for potential endogeneity and alternative measures of ethnic diversity and CSR performance. Our study highlights the impact of ethnic diversity on corporate behaviors, and provides practical and ethical implications on CSR promotion.