This study examines the broader implications of legislative interventions on corporate behavior, focusing on the unintended impact of regulatory requirements on firms' social responsibility engagement. We argue that such laws amplify firms’ perceived exposure to operational risks that are inherently difficult to eliminate. These risks, when materialized, can lead to reputational damage and strained stakeholder relationships, prompting firms to adapt strategically. Building on the literature that views corporate social responsibility (CSR) as a form of insurance that insulates firms against adverse events, we suggest that firms leverage CSR proactively as a buffer against the potential fallout of unforeseen operational disruptions. This adaptive behavior is particularly evident in firms that are highly exposed to stakeholder scrutiny, such as those with higher visibility and significant histories of media coverage for irresponsible practices. Analyzing a panel dataset of U.S. public firms over two decades, we provide empirical evidence supporting our assertions. Our findings extend the understanding of legislative impacts on corporate adaptation and highlight CSR’s role in enhancing firms’ resilience to external shocks.
