Early Life Suffering Experience from Great Famine on Firm Charity, Agency Costs, and Corporate Governance

Zhong-qin Su, Biwen Yang and Yuyang Xu

Chinese Economy, 2021, vol. 54, issue 5, 330-346

Abstract: This study examines the impact of directors’ famine experience on the corporate donation decision. We use a unique data set of 16,082 firm-year observations from Chinese listed firms to show that directors who experienced the Great Chinese Famine during 1959–1961 make more corporate donations, a result that supports the path dependency theory related to the effect of prior experiences on subsequent behaviors. The relationship between a director’s famine experiences and corporate charitable contributions is robust across different types of ownership and industry. We further show that these directors appear to consume fewer perquisites (i.e., lower agency costs), improve social responsibility, mitigate earnings management, and enhance internal control quality.

Date: 2021
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DOI: 10.1080/10971475.2021.1875157

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