Effects of Air Pollution on Corporate Charitable Donation： Evidence from China

Abstract

Air pollution, which is viewed as one of the global environmental challenges, not only brings huge health costs, but also worsens firm performance. An increasing number of studies have recognized that air pollution has important implications for firm behaviors. However, little research focuses on how air pollution influences corporate charitable donation, which is a key behavior for firms to improve reputation and market valuation. In this paper, we combine the listed data from China Stock Market and Accounting Research Database and city-level air pollution data in China to investigate the impact of air pollution on corporate charitable donation. Using the instrumental variable method and regression discontinuity design, we find that an increase in air pollution would lead to a reduction in corporate charitable donations. Our results are robust to various specifications that consider potential air pollution data manipulation, alternative measures, and exclusion of first-tier cities. We further conduct the heterogeneity analyses and find that state-owned enterprises and firms in highly polluting industries are more sensitive to the change of air pollution.

Keywords: Air pollution; Corporate charitable donations; China

JEL Classification: D22;D64;Q53