Donate Money, but Whose? An Empirical Study of Ultimate Control Rights, Agency Problems, and Corporate Philanthropy in China

Justin Tan and Yuejun Tang ()
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Justin Tan: York University
Yuejun Tang: Fudan University

Journal of Business Ethics, 2016, vol. 134, issue 4, No 6, 593-610

Abstract: Abstract Using empirical evidence gathered from Chinese listed companies, this article explores the relationship between micro-governance mechanisms and corporate philanthropy from a corporate governance perspective. In China’s emerging market, ultimate controlling shareholders of state-owned enterprises (SOEs) are reluctant to donate their assets or resources to charitable organizations; in private enterprises (PEs) marked by more deviation in voting and cash flow rights, such donations tend to be more likely. However, the ultimate controllers in PEs refuse to donate assets or resources they control or own, which implies that corporate philanthropy by PEs comes at the cost of others, through assets or resources owned by minority shareholders. Even after devastating natural disasters such as the 2008 Wenchuan Earthquake, the controlling shareholders continue to express reluctance to donate any assets they control. Despite widespread evidence that corporate philanthropy boosts corporate growth and profitability, these ultimate controllers indicate no intention to donate their own money as a means to improve corporate performance.

Keywords: Ultimate control right; Type II agency problem; Corporate philanthropy; Deviation of voting rights and cash flow rights (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (19)

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DOI: 10.1007/s10551-014-2386-2

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