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Contribution to poverty alleviation: A waste or benefit for corporate financing?

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  • He, Guanming
  • Li, Zhichao
  • Yu, Ling
  • Zhou, Zhanqiang

Abstract

We investigate whether Chinese firms’ involvements in poverty alleviation affect their costs of financing. We find causal evidence that firms’ contributions to poverty alleviation result in lower cost of equity and lower cost of debt, suggesting that poverty alleviation is appreciated by both equity investors and debt investors. This result is more pronounced for non-state-owned firms, financially healthy firms, firms receiving more subsidies from local governments, and firms with larger spending in advertisements. Our mediating analyses further reveal that enhanced reputation and trust among stakeholders are the mechanisms through which corporate alleviation of poverty reduces the costs of financing.

Suggested Citation

  • He, Guanming & Li, Zhichao & Yu, Ling & Zhou, Zhanqiang, 2023. "Contribution to poverty alleviation: A waste or benefit for corporate financing?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:intfin:v:89:y:2023:i:c:s1042443123001439
    DOI: 10.1016/j.intfin.2023.101875
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    More about this item

    Keywords

    Poverty reduction; Benefits for financing; Reputation and trust; Cost of equity; Cost of debt;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance
    • P36 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty
    • P46 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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