Paving the Way for Children: Family Firm Succession and Corporate Philanthropy in China

26 Pages Posted: 27 May 2020

See all articles by Wen He

Wen He

University of Queensland - Business School

Xin Yu

University of Queensland

Date Written: October/November 2019

Abstract

We investigate whether internal succession in family firms motivates founders to engage in corporate philanthropy. We argue that founders who intend to pass control of the firm to their children are likely to prepare for the internal succession by building up family assets such as reputation and political connections through corporate philanthropy. Supporting our argument, we find that both the likelihood and the amount of philanthropic donations increase when listed family firms in China are in the internal succession process. The effect of successions on philanthropic donations is stronger for family firms that have political connections or are located in areas with stronger government influence in the local economy. The effect concentrates on family firms when heirs are young and inexperienced. When heirs are established, family firms actually make fewer philanthropic donations. Our results remain robust after addressing endogeneity issues.

Keywords: corporate philanthropy, donation, family firms, succession

JEL Classification: G39, M14

Suggested Citation

He, Wen and Yu, Xin, Paving the Way for Children: Family Firm Succession and Corporate Philanthropy in China (October/November 2019). Journal of Business Finance & Accounting, Vol. 46, Issue 9-10, pp. 1237-1262, 2019, Available at SSRN: https://ssrn.com/abstract=3604490 or http://dx.doi.org/10.1111/jbfa.12402

Wen He (Contact Author)

University of Queensland - Business School

Brisbane, Queensland 4072
Australia

Xin Yu

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia

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