For goodwill or resources? The rationale behind firms' corporate philanthropy in an environment with high economic policy uncertainty

Haiqiang Chen, Ye Guo and Qiang Wen

China Economic Review, 2021, vol. 65, issue C

Abstract: This paper investigates the impact of economic policy uncertainty (EPU) on the corporate philanthropy (CP) behaviors of firms using a dataset from Chinese A-share listed firms. We find that, on average, firms decrease their CP significantly when economic policy uncertainty increases, but the response is heterogeneous for firms with different ownership types. Compared with their counterparts, private firms are willing to contribute more donations in an environment with high economic policy uncertainty. Further analysis shows that private firms take on more other types of corporate social responsibility at the same time, and private firms' additional CP in a high EPU environment is rewarded with more subsidies, indicating that altruistic and political motives may play important roles in driving the CP behaviors of private firms. There is no evidence that private firms selling products directly to consumers are more likely to engage in additional CP. Our findings indicate that the main motivation behind Chinese private firms' additional CP under high economic policy uncertainty is seeking more government resources, instead of keeping consumers loyal by maintaining good reputations during hard periods.

Keywords: Economic policy uncertainty; Corporate philanthropy; Corporate social responsibility; Strategic motive; Political motive (search for similar items in EconPapers)
JEL-codes: E60 G30 L20 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:65:y:2021:i:c:s1043951x20301772

DOI: 10.1016/j.chieco.2020.101580

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