Litigation risk and corporate philanthropy: A managerial perspective analysis

Shawn Qu

Finance Research Letters, 2024, vol. 62, issue PA

Abstract: This study uses the shock of directors’ and officers’ liability insurance (D&O insurance) to investigate how litigation risk influences corporate philanthropy. Based on a sample of Chinese listed corporations, we find that litigation risk positively impacts philanthropy, and that D&O insurance undermines corporate philanthropy by lowering this risk. From the informal system perspective, companies with a stronger Confucianism impact are likelier to see a decrease in philanthropy after purchasing D&O insurance. Our strong results imply that managers’ exposure to litigation risk may sometimes catalyze corporate philanthropy. This paper advances our knowledge of philanthropy behavior, outside the legal, ethical, and economic responsibilities of a corporation, and the factors that influence it.

Keywords: Philanthropy; D&O insurance; Litigation risk; Confucianism; Informal institutions (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324000850

DOI: 10.1016/j.frl.2024.105055

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