Corporate Philanthropic Giving: Active Responsibility Or Passive Ingratiation? Evidence From Chinese Family-Controlled Listed Companies

Abstract

This paper examines the impact of political connection on family-controlled listed firms’ philanthropic giving activities toward the 2008 Wenchuan Earthquake in China, and stock price reactions to such activities. Using the 542 Chinese listed companies controlled by private owners as the sample, it was found that firms with political connection are more likely to donate. Besides, focusing on the 244 donating firms, it was found that there is a positive impact of the donation amount on stock price response. What’s more, the positive stock price reactions toward the donation announcement made by firms with political connection are not as strong as that of firms without such connection.  Regression results indicate that although family-controlled firms with political connection are more likely to donate, their activities can not generate as much positive stock price effect as their no-political connection counterparts. These results reveal that both political interferences and market mechanisms have critical impact on corporate philanthropic behavior in China.