The spillover effect of a CSR mandate for China’s state-owned enterprises on mutual funds’ responsible investment

Whether government-mandated corporate social responsibility (CSR) initiatives foster meaningful CSR practices is a widely debated issue. Using a difference-in-differences approach and a sample of 38,684 fund observations from 2010 to 2021, we provide empirical evidence that a CSR mandate targeting Chinese state-owned enterprises (SOEs) has generated a positive spillover effect—manifested in enhanced socially responsible investment by mutual funds. Specifically, mutual funds affiliated with controlling state-owned capital shareholders increased their responsible investment following the implementation of the mandate, compared to funds without such affiliations. We further find that this spillover effect is statistically significant only among funds dominated by retail investors. Our findings suggest that government-led CSR policies targeting SOEs can meaningfully influence the asset management sector by guiding investment decisions and promoting more socially responsible investing. • CSR policies targeting SOEs can drive responsible investing in the asset management sector. • The spillover effect occurs through SOE shareholding in fund management companies. • The spillover effect is significant only among retail investor–dominated mutual funds.