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On corporate philanthropy of private firms and trade credit financing in China

Author

Listed:
  • Yang, Yan
  • Yao, Shujie
  • He, Hongbo
  • Ou, Jinghua

Abstract

This paper examines the impact of corporate philanthropy on trade credit financing for listed private firms in China viewed from the heterogeneous perceptions of credit suppliers. A positive relationship is found between corporate philanthropy and trade credit financing, suggesting that in general firms donating more can obtain more trade credits. However, this relationship is significant only for those firms with positive free cash flows and no political connections. It is striking to find that such a relationship does not exist when firms have negative free cash flows or political connections. Moreover, the relationship between corporate philanthropy and trade credits is affected by the local social trust environment. A good social trust environment is amicable for firms to use corporate philanthropy in obtaining trade credits. The research findings have important policy implications. This paper makes valuable contributions to the current literature through highlighting the importance of supplier heterogeneous perceptions towards corporate philanthropy as well as the effect of the local trust environment on the effectiveness of philanthropy in trade credit financing of the Chinese listed private firms.

Suggested Citation

  • Yang, Yan & Yao, Shujie & He, Hongbo & Ou, Jinghua, 2019. "On corporate philanthropy of private firms and trade credit financing in China," China Economic Review, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:chieco:v:57:y:2019:i:c:s1043951x1930077x
    DOI: 10.1016/j.chieco.2019.101316
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    Citations

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    Cited by:

    1. Zhang, Yanlei & García Lara, Juan Manuel & Tribó, Josep A., 2020. "Unpacking the black box of trade credit to socially responsible customers," Journal of Banking & Finance, Elsevier, vol. 119(C).
    2. Li, Wanli & Xu, Xixiong & Long, Zhineng, 2020. "Confucian Culture and Trade Credit: Evidence from Chinese Listed Companies," Research in International Business and Finance, Elsevier, vol. 53(C).
    3. Wang, Shihao & Wang, Jiamin & Sahil Maqsood, Umer & Wang, Keyun & Li, Qian, 2023. "Creditor protection and trade credit financing: Evidence from a quasi-natural experiment in China," Finance Research Letters, Elsevier, vol. 57(C).
    4. Alberto Calahorro-López & Melinda Ratkai & Julio Vena-Oya, 2022. "The Financial/Accounting Impact of FFP on Participating in European Competitions: An Analysis of the Spanish League," IJFS, MDPI, vol. 10(3), pages 1-19, September.
    5. Ji, Mianmian & Lv, Wendai, 2022. "Demonstration zones reform and corporate philanthropy: Evidence from China," Economic Modelling, Elsevier, vol. 115(C).
    6. He, Ke & Wang, Yujie & Zhang, Junbiao & Wang, Qingbin, 2022. "Out of the shadows: Impact of SARS experience on Chinese netizens' willingness to donate for COVID-19 pandemic prevention and control," China Economic Review, Elsevier, vol. 73(C).
    7. Li, (Tony) Wei & Shi, Lina, 2022. "Donation, political connection and credit access: The case of Chinese small and medium enterprises," Finance Research Letters, Elsevier, vol. 46(PA).
    8. Chaohai Shen & Bingquan Fang & Xiaolan Zhou, 2022. "The Relationship between Corporate Sustainable Development Performance, Investor Sentiment, and Managerial Overconfidence," Sustainability, MDPI, vol. 14(17), pages 1-19, August.

    More about this item

    Keywords

    Corporate philanthropy; Trade credit; Political connection; Trust environment; Social responsibility;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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