Market Condition and Flight to Quality: On Perspective of Social Responsibility Performance “Class Insurance” Effect

When the market environment is not good and the uncertainty increases, the fund has flight to quality behavior. The reputation capital formed by enterprises’ active social responsibility has the function of “Class Insurance”, which can prevent a sharp decline in stock prices and market value losses when negative events occur; then, will the fund manager turn the fund portfolio to the society when the market environment is not good? Using the open-end fund samples from 2010 to 2017, this paper empirically tests the relationship among corporate social responsibility, market environment and flight to quality. The results show that when the market condition is not good, the fund has a higher demand for hedging, and it tends to shift its investment portfolio to more stocks with high corporate social responsibility performance that can meet its hedging demand and have “like insurance” effects; The study also found that the fund’s safe investment transfer behavior had a positive impact on fund performance and fund return volatility.