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Corporate philanthropy and bank loans in China

Author

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  • Chen, Donghua
  • Jiang, Dequan
  • Yu, Xin

Abstract

This study examines the relationship between corporate philanthropy (CP) and firm access to bank loans using a sample of listed Chinese companies. We find a positive association between CP and access to bank loans, suggesting that charitable contributions provide firms with an advantage in obtaining access to external financing. This relationship is stronger for non-State-owned companies (non-SOEs) than for State-owned companies (SOEs), indicating that SOEs and non-SOEs may have different motivations for making charitable contributions. We further find that more visibility among customers enhances the positive association between CP and bank loans while more visibility among investors weakens the positive association. We also find that more religious influence weakens the positive relationship between CP and bank loans. Our findings have implications for academics and practitioners seeking to understand the positive role of CP for firms and the channels through which CP can positively affect firm performance.

Suggested Citation

  • Chen, Donghua & Jiang, Dequan & Yu, Xin, 2015. "Corporate philanthropy and bank loans in China," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 402-424.
    • Handle: RePEc:eee:pacfin:v:35:y:2015:i:pa:p:402-424
    DOI: 10.1016/j.pacfin.2015.03.004
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    2. Su, Zhong-qin & Xu, Yuyang & Xiao, Zuoping & Fung, Hung-Gay, 2020. "Directors’ prior life experience and corporate donations: Evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 53(C).
    3. McGuinness, Paul B. & Vieito, João Paulo & Wang, Mingzhu, 2017. "The role of board gender and foreign ownership in the CSR performance of Chinese listed firms," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 75-99.
    4. Robert W Faff & Stephen Gray & Kelvin Jui Keng Tan, 2016. "A contemporary view of corporate finance theory, empirical evidence and practice," Australian Journal of Management, Australian School of Business, vol. 41(4), pages 662-686, November.
    5. Wang, Lu & Su, Zhong-qin & Fung, Hung-Gay & Jin, Hong-min & Xiao, Zuoping, 2021. "Do CEOs with academic experience add value to firms? Evidence on bank loans from Chinese firms," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    6. Zhou, Chao, 2022. "Global diversification, host-country environments, and corporate philanthropic giving: Evidence from Chinese multinational corporations," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    7. Wu, Wuqing & Peng, Fei & Shan, Yuan George & Jie, Xiaoxiao, 2020. "Signaling through corporate philanthropy," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
    8. Paul B. McGuinness & João Paulo Vieito & Mingzhu Wang, 2020. "Proactive government intervention, board gender balance, and stakeholder engagement in China and Europe," Asia Pacific Journal of Management, Springer, vol. 37(3), pages 719-762, September.
    9. Li-Hsun Wang & Chu-Hsiung Lin & Erin H. Kao & Hung-Gay Fung, 2017. "Good deeds earn chits? Evidence from philanthropic family controlled firms," Review of Quantitative Finance and Accounting, Springer, vol. 49(3), pages 765-783, October.
    10. Chen, Haiqiang & Guo, Ye & Wen, Qiang, 2021. "For goodwill or resources? The rationale behind firms' corporate philanthropy in an environment with high economic policy uncertainty," China Economic Review, Elsevier, vol. 65(C).
    11. Balachandran, Balasingham & Faff, Robert, 2015. "Corporate governance, firm value and risk: Past, present, and future," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 1-12.
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    More about this item

    Keywords

    Corporate philanthropy; Bank loans; SOEs; China;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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