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Corporate Philanthropy After Fraud Punishment: An Institutional Perspective

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  • Zhang, Lin
  • Xu, Yuehua
  • Chen, Honghui
  • Jing, Runtian

Abstract

This study examines corporate philanthropy in the context of corporate wrongdoing punishment in emerging markets. Building on institutional theory, we propose that in emerging markets, after being punished for fraudulent behavior by the government, which is collectively the largest institution, convicted firms tend to use corporate philanthropy as an institutional strategy to regain legitimacy. Using data of Chinese-listed firms that were punished for financial fraud in the ten years from 2004 to 2013, our findings show the subsequent growth of corporate philanthropy to be positively related to punishment severity. Furthermore, convicted firms’ media visibility, dominant state ownership, and national political appointment strengthen the effect of punishment severity on corporate philanthropy increase. Our institutional perspective offers new insights into why firms engage in corporate philanthropy after fraud punishment.

Suggested Citation

  • Zhang, Lin & Xu, Yuehua & Chen, Honghui & Jing, Runtian, 2020. "Corporate Philanthropy After Fraud Punishment: An Institutional Perspective," Management and Organization Review, Cambridge University Press, vol. 16(1), pages 33-68, February.
    • Handle: RePEc:cup:maorev:v:16:y:2020:i:1:p:33-68_5
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    Cited by:

    1. Zhong, Xi & Chen, Weihong & Ren, Ge, 2022. "The impact of corporate social irresponsibility on emerging-economy firms’ long-term performance: An explanation based on signal theory," Journal of Business Research, Elsevier, vol. 144(C), pages 345-357.
    2. Lin Zhang & Yuehua Xu & Honghui Chen, 2022. "Do Returnee Executives Value Corporate Philanthropy? Evidence from China," Journal of Business Ethics, Springer, vol. 179(2), pages 411-430, August.
    3. Bugdol Marek & Puciato Daniel, 2023. "Punishment of employees – its causes, types, and consequences, as well as factors determining punishment for poor quality," International Journal of Contemporary Management, Sciendo, vol. 59(4), pages 1-17, December.
    4. Samuel Adomako & Mai Dong Tran, 2024. "Beyond profits: The linkages between local embeddedness, social legitimacy, and corporate philanthropy in the mining industry," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(1), pages 555-565, January.
    5. Zhe Ouyang & Qian Sun & Yang Liu, 2024. "The impact of investor reaction to crisis events on corporate philanthropy: evidence from Chinese firms," Asian Business & Management, Palgrave Macmillan, vol. 23(1), pages 139-163, February.
    6. Chenhao Hu, 2023. "The dual role of state shareholders in disclosed corporate misconduct: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1732-1748, April.
    7. Cai, Wenjing & Cai, Xinni & Wang, Zehao & Yang, Ge, 2023. "The spillover effect of penalty against peer firm leaders——Evidence from earnings management," Finance Research Letters, Elsevier, vol. 54(C).

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