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Corporate Philanthropy and Stock Price Crash Risk: Evidence from China

Author

Listed:
  • Min Zhang

    (Renmin University of China)

  • Lu Xie

    (Renmin University of China)

  • Haoran Xu

    (Renmin University of China)

Abstract

How to mitigate stock price crash risk has become a focus in the theoretical and practical fields. Building on the work of Kim et al. (J Bank Finance, 43:1–13, 2014b), this paper investigates the relation between corporate philanthropy and crash risk under the unique Chinese institutional background. The results show that both state ownership and the 2005 split share reform attenuate the mitigating effect of corporate philanthropy on crash risk. Specifically, the negative relation between corporate philanthropy and crash risk is less pronounced for state-owned enterprises than for non-state-owned enterprises, and it is also less pronounced after firms accomplish the split share reform. Further, this effect is more pronounced for firms with greater financial risks and poorer performance. Our paper contributes to the growing literature on the determinants of stock price crash risk and the economic consequences of corporate philanthropy. It also offers useful guidance to firms that are seeking to reduce stock price crash risk in emerging markets.

Suggested Citation

  • Min Zhang & Lu Xie & Haoran Xu, 2016. "Corporate Philanthropy and Stock Price Crash Risk: Evidence from China," Journal of Business Ethics, Springer, vol. 139(3), pages 595-617, December.
    • Handle: RePEc:kap:jbuset:v:139:y:2016:i:3:d:10.1007_s10551-015-2647-8
    DOI: 10.1007/s10551-015-2647-8
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    References listed on IDEAS

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    More about this item

    Keywords

    Stock price crash risk; Corporate philanthropy; State ownership; 2005 split share reform;
    All these keywords.

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • 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

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