What Drives Corporate Charitable Contributions, Market Forces, Government Influences, or Political Goodwill? Evidence from China

41 Pages Posted: 18 Jan 2011

See all articles by Junxiong Fang

Junxiong Fang

Fudan University - School of Management

Wenjing Li

China University of Political Science and Law - China University of Political Science and Law, Center for Law and Economics

Yue Li

University of Toronto - Joseph Rotman School of Management

Date Written: January 16, 2011

Abstract

This study examines the determinants and consequences of corporate charitable contributions in China. Using a large sample of listed firms from 2001 to 2006, we find that firms with political connections are more likely to make charitable contributions. Firms owned by local governments are more likely to make charitable contributions than firms owned by the central government. Furthermore, we find that resource constraints and industry competition cannot explain corporate philanthropy in China. We document a positive association between charitable contributions and future firm performance but find no evidence that charitable contributions affect future sales growth. Further analysis indicates that firms making charitable contributions received more bank loans and government subsidies. The overall results are consistent with listed companies in China using charitable contributions to build the political goodwill with the government.

Keywords: corporate charitable contributions, corporate philanthropy

JEL Classification: M14

Suggested Citation

Fang, Junxiong and Li, Wenjing and Li, Yue, What Drives Corporate Charitable Contributions, Market Forces, Government Influences, or Political Goodwill? Evidence from China (January 16, 2011). CAAA Annual Conference 2011, Available at SSRN: https://ssrn.com/abstract=1742104 or http://dx.doi.org/10.2139/ssrn.1742104

Junxiong Fang

Fudan University - School of Management ( email )

No. 670, Guoshun Road
No.670 Guoshun Road
Shanghai, 200433
China

Wenjing Li

China University of Political Science and Law - China University of Political Science and Law, Center for Law and Economics ( email )

China

Yue Li (Contact Author)

University of Toronto - Joseph Rotman School of Management ( email )

Joseph Rotman School of Management
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-978-0857 (Phone)
416-971-3048 (Fax)

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