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Corporate Philanthropy and Tunneling: Evidence from China

Author

Listed:
  • Jun Chen

    (Zhejiang University)

  • Wang Dong

    (Zhejiang University)

  • Jamie Tong

    (University of Western Australia)

  • Feida Zhang

    (Murdoch University)

Abstract

This paper examines the association between corporate philanthropy and tunneling by controlling shareholders. Using a unique dataset from China, the paper finds evidence that firms donating more are less likely to tunnel. The negative association between philanthropy and tunneling is stronger when firms are faced with more severe agency conflicts, as indicated by lower largest shareholding, fewer growth opportunities, lower state ownership, and weaker product market competition. The results suggest that companies engaging in philanthropy have incentives to enhance their reputations and improve their relationships with stakeholders.

Suggested Citation

  • Jun Chen & Wang Dong & Jamie Tong & Feida Zhang, 2018. "Corporate Philanthropy and Tunneling: Evidence from China," Journal of Business Ethics, Springer, vol. 150(1), pages 135-157, June.
    • Handle: RePEc:kap:jbuset:v:150:y:2018:i:1:d:10.1007_s10551-016-3166-y
    DOI: 10.1007/s10551-016-3166-y
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