Does share pledging affect corporate philanthropy? Evidence from China

Jiacai Xiong · Jamie Yixing Tong · Feida Frank Zhang · Caiyue Ouyang · Kam C. Chan

22 citations0/0 files storedJournal of Business Finance &amp Accounting

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Corporate Finance and Governance Nonprofit Sector and Volunteering Corporate Social Responsibility Reporting

Abstract

Abstract We investigate the effect of insiders’ share pledging (SP) on corporate philanthropy and find that SP firms engage in corporate philanthropy more often than non‐SP firms. This effect is more pronounced for firms with higher downward price pressure or margin call risks. Our results remain robust after using alternative measures and addressing endogeneity issues. We also sample a group of SP and non‐SP firms that make comparable philanthropic donations and find that SP firms show better market performance and lower downside risks of stock price movements than non‐SP firms, indicating that SP firms use corporate philanthropy to alleviate margin call risks.

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References

2010New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index 2005Law, finance, and economic growth in China 2013Corporate social responsibility and access to finance 2003Enjoying the Quiet Life? Corporate Governance and Managerial Preferences 2006Financial Constraints Risk 2010Does Corporate Social Responsibility Affect the Cost of Capital?2005The Relationship Between Corporate Philanthropy And Shareholder Wealth: A Risk Management Perspective 2009Opaque financial reports, R2, and crash risk☆

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