Leverage, Corporate Philanthropy and Institutional Environment: Evidence from China
Author(s)
Ming Qian , Guanghua Xu , Yi Shen ,
Download Full PDF Pages: 43-53 | Views: 1238 | Downloads: 365 | DOI: 10.5281/zenodo.3483327
Abstract
Based on the perspective of institutional theory and resource-based theory, this study examines the relationship between leverage and the amount of corporate donation. Also, we explore whether this relation is influenced by institutional environment. Using empirical data from China, a typical emerging market, we find that for state-owned enterprises (SOEs), there is a negative relationship between leverage and donation amount, while this association turns to positive for non-SOEs. We suggest this difference is caused by China’s institutional environment. Since non-SOEs are lack of endorsement, they are more likely to do corporate philanthropy to build a close link with the government, while SOEs needn’t do this because they can get enough support from the government even they don’t do corporate philanthropy. This result indicates that institutional environment makes the strategy of corporate philanthropy of SOEs different from the behavior pattern of non-SOEs.
Keywords
Leverage; Corporate Philanthropy; Corporate Social Responsibility; Institutional Environment; Emerging Markets; China
References
i. Adams, Mike, and Philip Hardwick. 1998. "An analysis of corporate donations: United Kingdom evidence." Journal of Management Studies 35 (5):641-654.
ii. Altman, Edward I, and Edith Hotchkiss. 2010. Corporate financial distress and bankruptcy: Predict and avoid bankruptcy, analyze and invest in distressed debt. Vol. 289: John Wiley & Sons.
iii. Amato, Louis H, and Christie H Amato. 2007. "The effects of firm size and industry on corporate giving." Journal of Business Ethics 72 (3):229-241.
iv. Amato, Louis H, and Christie H Amato. 2012. "Retail philanthropy: Firm size, industry, and business cycle." Journal of business ethics 107 (4):435-448.
v. Beliveau, Barbara, Melville Cottrill, and Hugh M O'Neill. 1994. "Predicting corporate social responsiveness: A model drawn from three perspectives." Journal of Business Ethics 13 (9):731-738.
vi. Benson, Bradley W, and Wallace N Davidson. 2010. "The relation between stakeholder management, firm value, and CEO compensation: A test of enlightened value maximization." Financial Management 39 (3):929-964.
vii. Brammer, Stephen, and Andrew Millington. 2006. "Firm size, organizational visibility and corporate philanthropy: an empirical analysis." Business Ethics: A European Review 15 (1):6-18.
viii. Brammer, Stephen, and Andrew Millington. 2008. "Does it pay to be different? An analysis of the relationship between corporate social and financial performance." Strategic Management Journal 29 (12):1325-1343.
ix. Brandt, Loren, and Hongbin Li. 2003. "Bank discrimination in transition economies: ideology, information, or incentives?" Journal of comparative economics 31 (3):387-413.
x. Brown, William O, Eric Helland, and Janet Kiholm Smith. 2006. "Corporate philanthropic practices." Journal of Corporate Finance 12 (5):855-877.
xi. Campbell, John L. 2007. "Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility." Academy of management Review 32 (3):946-967.
xii. Chen, Hanwen, Jeff Zeyun Chen, Gerald J Lobo, and Yanyan Wang. 2010. "Association between borrower and lender state ownership and accounting conservatism." Journal of Accounting Research 48 (5):973-1014.
xiii. Cheng, Beiting, Ioannis Ioannou, and George Serafeim. 2014. "Corporate social responsibility and access to finance." Strategic Management Journal 35 (1):1-23.
xiv. Claessens, Stijn, Simeon Djankov, and Larry HP Lang. 2000. "The separation of ownership and control in East Asian corporations." Journal of financial Economics 58 (1):81-112.
xv. Daniel, Francis, Franz T. Lohrke, Charles J. Fornaciari, and R. Andrew Turner. 2004. "Slack resources and firm performance: a meta-analysis." Journal of Business Research 57 (6):565-574.
xvi. Dhaliwal, Dan S, Oliver Zhen Li, Albert Tsang, and Yong George Yang. 2011. "Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of corporate social responsibility reporting." The Accounting Review 86 (1):59-100.
xvii. Dou, J., Z. Zhang, and E. Su. 2014. "Does Family Involvement Make Firms Donate More? Empirical Evidence From Chinese Private Firms." Family Business Review 27 (3):259-274.
xviii. Ducassy, Isabelle. 2013. "Does corporate social responsibility pay off in times of crisis? An alternate perspective on the relationship between financial and corporate social performance." Corporate Social Responsibility and Environmental Management 20 (3):157-167.
xix. Elsayed, Khaled. 2006. "Reexamining the expected effect of available resources and firm size on firm environmental orientation: An empirical study of UK firms." Journal of Business Ethics 65 (3):297-308.
xx. Faccio, Mara, and Larry HP Lang. 2002. "The ultimate ownership of Western European corporations." Journal of financial economics 65 (3):365-395.
xxi. Faccio, Mara, Ronald W Masulis, and John McConnell. 2006. "Political connections and corporate bailouts." The Journal of Finance 61 (6):2597-2635.
xxii. Ferri, Giovanni, and Li-Gang Liu. 2010. "Honor Thy Creditors Beforan Thy Shareholders: Are the Profits of Chinese State-Owned Enterprises Real?*." Asian Economic Papers 9 (3):50-71.
xxiii. González, Víctor M. 2013. "Leverage and corporate performance: International evidence." International Review of Economics & Finance 25:169-184.
xxiv. Hoskisson, Robert O, and Richard A Johnson. 1992. "Research notes and communications corporate restructuring and strategic change: The effect on diversification strategy and R & D intensity." Strategic Management Journal 13 (8):625-634.
xxv. Ioannou, Ioannis, and George Serafeim. 2012. "What drives corporate social performance? The role of nation-level institutions." Journal of International Business Studies 43 (9):834-864. doi: 10.1057/jibs.2012.26.
xxvi. Jones, Marc T. 1999. "The institutional determinants of social responsibility." Journal of Business Ethics 20 (2):163-179.
xxvii. Julian, Scott D, and Joseph C Ofori‐dankwa. 2013. "Financial resource availability and corporate social responsibility expenditures in a sub‐Saharan economy: The institutional difference hypothesis." Strategic Management Journal 34 (11):1314-1330.
xxviii. Lang, Larry, Eli Ofek, and RenéM Stulz. 1996. "Leverage, investment, and firm growth." Journal of financial Economics 40 (1):3-29.
xxix. Li, Sihai, Xianzhong Song, and Huiying Wu. 2014. "Political Connection, Ownership Structure, and Corporate Philanthropy in China: A Strategic-Political Perspective." Journal of Business Ethics. doi: 10.1007/s10551-014-2167-y.
xxx. Li, Wenjing, and Ran Zhang. 2010. "Corporate social responsibility, ownership structure, and political interference: Evidence from China." Journal of Business Ethics 96 (4):631-645.
xxxi. Liu, Qiao. 2006. "Corporate governance in China: Current practices, economic effects and institutional determinants." CESifo Economic Studies 52 (2):415-453.
xxxii. Madden, Kym, Wendy Scaife, and Kathryn Crissman. 2006. "How and why small to medium size enterprises (SMEs) engage with their communities: An Australian study." International Journal of Nonprofit and Voluntary Sector Marketing 11 (1):49-60.
xxxiii. Matten, Dirk, and Jeremy Moon. 2008. "“Implicit” and “explicit” CSR: A conceptual framework for a comparative understanding of corporate social responsibility." Academy of management Review 33 (2):404-424.
xxxiv. McElroy, Katherine Maddox, and John J Siegfried. 1985. "The effect of firm size on corporate philanthropy." Quarterly Review of Economics and Business 25 (2):18-26.
xxxv. Michelon, Giovanna, Giacomo Boesso, and Kamalesh Kumar. 2013. "Examining the link between strategic corporate social responsibility and company performance: An analysis of the best corporate citizens." Corporate Social Responsibility and Environmental Management 20 (2):81-94.
xxxvi. Neiheisel, Steven R. 1994. Corporate strategy and the politics of goodwill: A political analysis of corporate philanthropy in America. Vol. 40: Peter Lang Pub Incorporated.
xxxvii. Opler, Tim C, and Sheridan Titman. 1994. "Financial distress and corporate performance." The Journal of Finance 49 (3):1015-1040.
xxxviii. Ortiz-de-Mandojana, Natalia, Javier Aguilera-Caracuel, and Matilde Morales-Raya. 2014. "Corporate Governance and Environmental Sustainability: The Moderating Role of the National Institutional Context." Corporate Social Responsibility and Environmental Management:n/a-n/a. doi: 10.1002/csr.1367.
xxxix. Pushner, George M. 1995. "Equity ownership structure, leverage, and productivity: Empirical evidence from Japan." Pacific-Basin Finance Journal 3 (2):241-255.
xl. Sánchez, Carol M. 2000. "Motives for corporate philanthropy in El Salvador: Altruism and political legitimacy." Journal of Business Ethics 27 (4):363-375.
xli. Sánchez, José Luis Fernández, Ladislao Luna Sotorrío, and Elisa Baraibar Díez. 2011. "The relationship between corporate governance and corporate social behavior: a structural equation model analysis." Corporate Social Responsibility and Environmental Management 18 (2):91-101.
xlii. Saiia, David H, Archie B Carroll, and Ann K Buchholtz. 2003. "Philanthropy as strategy when corporate charity “begins at home”." Business & Society 42 (2):169-201.
xliii. Surroca, Jordi, Josep A Tribó, and Sandra Waddock. 2010. "Corporate responsibility and financial performance: The role of intangible resources." Strategic Management Journal 31 (5):463-490.
xliv. Udayasankar, Krishna. 2008. "Corporate social responsibility and firm size." Journal of Business Ethics 83 (2):167-175.
xlv. Waddock, Sandra A, and Samuel B Graves. 1997. "The corporate social performance-financial performance link." Strategic management journal 18 (4):303-319.
xlvi. Wahba, Hayam. 2008. "Exploring the moderating effect of financial performance on the relationship between corporate environmental responsibility and institutional investors: Some Egyptian evidence." Corporate Social Responsibility and Environmental Management 15 (6):361-371.
xlvii. Wahba, Hayam. 2010. "How do institutional shareholders manipulate corporate environmental strategy to protect their equity value? A study of the adoption of ISO 14001 by Egyptian firms." Business Strategy and the Environment 19 (8):495-511.
xlviii. Wang, Jia, and Betty S Coffey. 1992. "Board composition and corporate philanthropy." Journal of business Ethics 11 (10):771-778.
xlix. Wang, Qian, Tak-Jun Wong, and Lijun Xia. 2008. "State ownership, the institutional environment, and auditor choice: Evidence from China." Journal of Accounting and Economics 46 (1):112-134.
l. Weill, Laurent. 2007. "Leverage and Corporate Performance: Does Institutional Environment Matter?" Small Business Economics 30 (3):251-265.
li. Zhang, Ran, Zabihollah Rezaee, and Jigao Zhu. 2009. "Corporate Philanthropic Disaster Response and Ownership Type: Evidence from Chinese Firms’ Response to the Sichuan Earthquake." Journal of Business Ethics 91 (1):51-63.
Cite this Article: