Corporate Social Responsibility Ratings, Market Attention, and Stock Liquidity: Evidence From China

ABSTRACT This paper investigates how corporate social responsibility (CSR) ratings affect stock liquidity, emphasizing the role of market attention. Using Chinese A‐share listed firms' (2010–2020) data, we find that higher CSR ratings can improve stock liquidity. This result remains robust after addressing potential endogeneity issues including PSM, instrumental variable regression, DiD model and alternative measures of CSR and stock liquidity. Attention from capital‐market professionals, the media and the public helps explain this relationship. The incentive effect is more pronounced in firms with lower leverage, higher ROA, lower book‐to‐market ratios, and higher Tobin's Q, especially in East China. Positive investor sentiment further strengthens this link. CSR helps reduce information asymmetry and builds reputation capital, offering fresh insights into liquidity determinants through the lens of market attention.