Economic policy uncertainty and corporate social responsibility: evidence from emerging countries

Abstract

This study examines the impact of economic policy uncertainty on corporate social responsibility (CSR) performance using a panel dataset spanning from 2004 to 2021 across six emerging countries within Southeast Asia. We find a negative association between country-level economic policy uncertainty and firms’ CSR performance, particularly in terms of environmental and social indicators. Our findings remain robust across various robustness analyses and after addressing endogeneity concerns. Further, our study sheds light on how country-level policy uncertainty influences firms’ sustainability investments across different sectors. Specifically, firms in the Consumer Discretionary, Basic Materials and Real Estate sectors experience adverse effects from increased economic uncertainty, whereas those in the Health Care sector demonstrate a positive correlation. The study suggests that policymakers and firm managers should address economic policy uncertainty to enhance CSR performance and sustainability investments across industries.