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Motives for corporate philanthropy propensity: Does short selling matter?

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

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.

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  • Hou, Deshuai & Meng, Qingbin & Zhang, Kai & Chan, Kam C., 2019. "Motives for corporate philanthropy propensity: Does short selling matter?," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 24-36.
    • Handle: RePEc:eee:reveco:v:63:y:2019:i:c:p:24-36
    DOI: 10.1016/j.iref.2018.07.009
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