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Motives for corporate philanthropy propensity: Does short selling matter?

Deshuai Hou, Qingbin Meng, Kai Zhang and Kam C. Chan

International Review of Economics & Finance, 2019, vol. 63, issue C, 24-36

Abstract: We examine the impact of short selling on a firm's CP propensity in a sample of Chinese firms. Drawing from the strategic view of CP literature, we postulate that when a firm faces weaknesses, it has incentive to use CP to divert public attention. Our results, as expected, suggest that when there is a surge in short selling, a firm is more likely to make CP in a given year. The findings are robust to endogeneity concerns and different measure of CP propensity. Sub-sample analyses use corporate transparency, operating results, corporate governance, and prior security violation suggest that when a firm is less transparent, having poor operating performance, an ineffective corporate governance, and anticipated future security violation, it is more likely to using CP to divert the public attention.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:63:y:2019:i:c:p:24-36

DOI: 10.1016/j.iref.2018.07.009

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