Corporate Philanthropy After Fraud Punishment: An Institutional Perspective

Abstract

This study examines corporate philanthropy in the context of corporate wrongdoing punishment in emerging markets. Building on institutional theory, we propose that in emerging markets, after being punished for fraudulent behavior by the government, which is collectively the largest institution, convicted firms tend to use corporate philanthropy as an institutional strategy to regain legitimacy. Using data of Chinese-listed firms that were punished for financial fraud in the ten years from 2004 to 2013, our findings show the subsequent growth of corporate philanthropy to be positively related to punishment severity. Furthermore, convicted firms’ media visibility, dominant state ownership, and national political appointment strengthen the effect of punishment severity on corporate philanthropy increase. Our institutional perspective offers new insights into why firms engage in corporate philanthropy after fraud punishment.

Do Returnee Executives Value Corporate Philanthropy? Evidence from China

“…Third, we contribute to upper echelons theory in two ways. Different from the view focusing on the impact of individual executives (Liu et al, 2021 ; Zhang et al, 2020 ), our findings about the relationship between top executives’ overseas experience and corporate philanthropy indicate that the demographic heterogeneity of top executives has strong explanations for firm strategic choices. Thus, it provides evidence for the view on upper echelon theory that advocates the examination of the collective attributes of executives rather than individual executives (Beckman & Burton, 2011 ; Hambrick, 2007 ).…”

“…In particular, it plays a very important role in pleasing key stakeholders (e.g., government and the public) and gaining legitimacy in emerging economies such as China (Li et al, 2015 ; Zhang et al, 2021 ). It is thus more valued by firms in such countries (Zhang et al, 2020 ). Empirical studies have provided evidence that corporate philanthropy is more valued in some emerging economies than in developed countries (Lindgreen et al, 2009a ).…”

“…One important collective attributes of top executives affecting firms’ decisions and outcomes is executives’ overseas experience (Lin et al, 2016 ). Corporate philanthropy is an important nonmarket strategy in emerging economies (Zhang et al, 2020 ). The current study focuses on returnee executives and tries to explore the relationship between returnee executives and corporate philanthropy.…”

“…We choose corporate philanthropy as the key outcome variable of returnee executives, which is an important nonmarket strategy in emerging economies (Zhang et al, 2020 ). Corporate philanthropy refers to the voluntary, unconditional transfer of cash or other assets by firms for public purposes (Gautier & Pache, 2015 ).…”

“…Corporate philanthropy refers to the voluntary, unconditional transfer of cash or other assets by firms for public purposes (Gautier & Pache, 2015 ). While earlier studies often viewed it as a component of corporate social responsibility (hereafter “CSR”) (Carroll, 1979 ; Dahlsrud, 2008 ; Wood, 1991 ), recent studies have highlighted that corporate philanthropy plays more important strategic roles in meeting the expectations of some key stakeholders, particularly in emerging economies such as China (e.g., Li et al, 2015 ; Lindgreen et al, 2009a ; Wang & Qian, 2011 ; Zhang et al, 2020 ). We first propose that firms donate less to philanthropic causes when they have a higher proportion of returnee executives, because returnee executives may be less likely than local executives to recognize the strategic value of philanthropy in emerging economies.…”