Does share pledging affect corporate philanthropy? Evidence from China

Jiacai Xiong, Yixing Tong, Feida Zhang, Caiyue Ouyang and Kam C. Chan

Journal of Business Finance & Accounting, 2024, vol. 51, issue 1-2, 180-208

Abstract: We investigate the effect of insiders’ share pledging (SP) on corporate philanthropy and find that SP firms engage in corporate philanthropy more often than non‐SP firms. This effect is more pronounced for firms with higher downward price pressure or margin call risks. Our results remain robust after using alternative measures and addressing endogeneity issues. We also sample a group of SP and non‐SP firms that make comparable philanthropic donations and find that SP firms show better market performance and lower downside risks of stock price movements than non‐SP firms, indicating that SP firms use corporate philanthropy to alleviate margin call risks.

Date: 2024
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