This paper investigates whether philanthropic giving decisions and amount of charitable giving are related to firms’ political connections and ownership type. To this end, Chinese firms listed on either the Shenzhen or Shanghai stock exchange between 2004 and 2011 are examined, where government interference in the business sector is prevalent, state ownership structure is dominant, and corporate political connections prevail. Our analyses show a significant and positive relationship between political connections and the likelihood and extent of firm contributions; a significant (...) and negative relationship between state ownership and extent of firm contributions; and a stronger relationship between political connections and corporate philanthropy in non-state-owned firms. These findings with regard to the relationship between corporate giving, political connections, and ownership type have important implications for understanding corporate giving behavior in China and in emerging markets in general. (shrink)

The principal–principal perspective suggests that controlling shareholders have excessive influence on corporate philanthropy and may direct corporate funds to charitable causes to support their personal interests. Analysis of a sample of Chinese private firms listed on the Shenzhen or Shanghai stock exchange between 2004 and 2011 shows that there is a significant and negative relationship between corporate giving and the share held by the largest shareholders, suggesting that controlling shareholders are opportunistic in directing corporate charitable contributions; there is a significant (...) and positive relationship between corporate giving and the political connections of the largest shareholders and their agents, suggesting compatibility between corporate contributions and the personal interests of the controlling shareholders; there is a stronger negative relationship between corporate giving and the share of the company held by the largest shareholders in politically connected firms, suggesting that political connections contribute to increased opportunistic corporate giving. Overall, our study provides important evidence for the “one dominant controlling shareholder” phenomenon by testing and extending the principal–principal framework and showing that the largest shareholders of Chinese firms appear to donate to charitable causes that ultimately serve their personal interests at the expense of minority shareholders. (shrink)

On 19 October 2013, the Chinese government issued the Opinions on Further Regulation on Party and Political Leaders and Cadres Working Part-Time in Enterprises, also known as the 18th Decree, to regulate government officials’ employment with businesses. The 18th Decree is widely perceived as having had a significant impact on the use of independent directors with political backgrounds by firms, given the prevalence of this business practice. This paper examines the market reaction to the 18th Decree to ascertain the value (...) effect of political connections in China. We note a negative relationship between the political connections of independent directors and market reaction. We also note that the negative relationship between political connections and market reaction is moderated by ownership type and state of regional development. Specifically, we find that the negative relationship holds only for private firms in less developed regions. These results support our prediction that political connections add value to Chinese firms and that the value effect of political connection is contingent on institutional factors. (shrink)

The reform of China’s one-child policy allows families to have more children and thus may affect anticipation of intergenerational succession of family businesses and drive family firms to improve their corporate social responsibility (CSR). Using a difference-in-differences design, we find that the reform positively affects the CSR of family firms. We also find that the positive impact is more pronounced for family firms whose owners have fewer children, have no son, and have not yet surpassed reproductive age (older than 50), (...) which confirms the theory that anticipation of intergenerational succession drives CSR in such firms. Moreover, we find that the positive impact is more pronounced for firms that operate in environments where CSR is more strategically important. We validate our findings by showing that the reform prompts investment in value-enhancing CSR and curtails short-termism. This study offers novel evidence that government policies conducive to intergenerational succession in family firms can lead to not only strategic CSR but also to truly ethical corporate behaviour. (shrink)