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

Yan Yang, Shujie Yao, Hongbo He and Jinghua Ou

China Economic Review, 2019, vol. 57, issue C

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.

Keywords: Corporate philanthropy; Trade credit; Political connection; Trust environment; Social responsibility (search for similar items in EconPapers)
JEL-codes: C23 C26 E22 G32 M14 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:57:y:2019:i:c:s1043951x1930077x

DOI: 10.1016/j.chieco.2019.101316

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