Corporate Philanthropy and Stock Price Crash Risk: Evidence from China

Zhang, Min; Xie, Luyu; Xu, Hongguo

doi:10.1007/s10551-015-2647-8

Cited by 104 publications

(60 citation statements)

References 54 publications

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“…4 An indicator variable might not be appropriate to measure stock price crash risk, because in China, the price limiting mechanism limits the range of daily fluctuations of stock price within 10 percent. All the prior studies based on China's listed firms do not adopt such an indicator variable to measure crash risk (e.g., Xu et al, 2014;Yuan et al, 2016;Zhang, Xie, & Xu, 2015). 5 We also explore the moderating effect of state ownership on the relationship between the reform and crash risk.…”

Section: Economic Mechanisms Between the Reform And Crash Riskmentioning

confidence: 99%

Principal–principal agency problems and stock price crash risk: Evidence from the split‐share structure reform in China

Sun

Yuan

Cao

et al. 2017

Corporate Governance

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Manuscript Type: EmpiricalResearch Question/Issue: On April 2005, the China Securities Regulatory Commission (CSRC) launched the split-share structure reform to mitigate principal-principal agency problems.Using the reform as an exogenous shock, we examine the impact of principal-principal agency problems on stock price crash risk. Specifically, this study attempts to answer two questions:(1) Does the split-share structure reform in China decrease stock price crash risk? (2) Is the above effect induced by the mitigation of principal-principal agency problems?Research Findings/Insights: We find that the reform induces a significant decrease in crash risk after controlling for other predictors of crash risk, and this effect is more pronounced in firms with a higher proportion of shares held by controlling shareholders. Moreover, we find that the negative impact of the reform on stock price crash risk is more pronounced in firms with a high level of tunneling prior to the reform, which indicates that reform induces less tunneling, and adversely affects crash risk.Theoretical/Academic Implications: This study contributes to the literature in two ways.First, this study constitutes the first effort to explore the determinants of stock price crash risk from the perspective of principal-principal agency problems. Second, this study enriches the growing literature on the economic consequences of the split-share structure reform in China.Practitioner/Policy Implications: We draw two important implications from our results.First, our findings highlight that regulatory intervention is an important way to enhance corporate governance. This is particularly beneficial in China, a transitional economy which may lag in terms of general protection of investors and information disclosure. Second, this study also confirms that minority shareholders and listed firms benefit from the reform. Both are crucial to the healthy development of the capital market in China. KEYWORDScorporate governance, non-tradable shares, principal-principal agency problems, split-share structure, stock price crash risk

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Section: Economic Mechanisms Between the Reform And Crash Riskmentioning

confidence: 99%

Principal–principal agency problems and stock price crash risk: Evidence from the split‐share structure reform in China

Sun

Yuan

Cao

et al. 2017

Corporate Governance

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“…On the basis of a straightforward model of political influence, our estimates imply that 7.1% of total U.S. corporate charitable giving is politically motivated. Therefore, most corporate philanthropy studies showed affirmative economic consequences, such as lowering idiosyncratic risk (Lee & Faff, 2009), lowering the cost of equity and debt capital (Cheng, Ioannou, & Serafeim, 2014;El Ghoul et al, 2011), reducing the risk of stock price crashes (Zhang et al, 2016), and increasing investment efficiency (Chen et al, 2018).…”

Section: Corporate Philanthropic Givingmentioning

confidence: 99%

“…Kim, Li, and Zhang (2011) documented that socially responsible firms maintain high standards of transparency and are less likely to withhold negative information from investors. Prior papers showed that philanthropic giving enhances financial performance (Wang & Qian, 2011) and investment efficiency (Chen et al, 2018) and reduces the risk of stock price crashes (Zhang et al, 2016). Some of recent study also report that CPG is used for political influence, tax exemption, fund tunneling, and so forth (Bertrand et al, 2018;Kim et al, 2019).…”

Section: Hypotheses Developmentmentioning

confidence: 99%

“…Therefore, most corporate philanthropy studies showed affirmative economic consequences, such as lowering idiosyncratic risk (Lee & Faff, 2009), lowering the cost of equity and debt capital (Cheng, Ioannou, & Serafeim, 2014;El Ghoul et al, 2011), reducing the risk of stock price crashes (Zhang et al, 2016), and increasing investment efficiency (Chen et al, 2018). Therefore, most corporate philanthropy studies showed affirmative economic consequences, such as lowering idiosyncratic risk (Lee & Faff, 2009), lowering the cost of equity and debt capital (Cheng, Ioannou, & Serafeim, 2014;El Ghoul et al, 2011), reducing the risk of stock price crashes (Zhang et al, 2016), and increasing investment efficiency (Chen et al, 2018).…”

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confidence: 99%

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Does corporate philanthropic giving reduce analyst earnings dispersion? Evidence from Korea

Chun

2019

Corp Soc Responsibility Env

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This study investigates the relationship between corporate philanthropic giving and analyst earnings dispersion using Korean data from 2002 to 2015. Prior studies showed that philanthropic giving enhances financial performance and investment efficiency and reduces the risk that stock prices will crash. Despite the growing importance of corporate philanthropic giving, few studies examined how corporate giving affects analyst earnings dispersion.The empirical result suggests that, first, a higher level of corporate giving is significantly and negatively associated with analyst earnings dispersion. Second, the negative association between corporate giving and analyst earnings dispersion is more pronounced in nonchaebol firms. This study might be the first attempt to use qualified donation expense data in Korea to examine the direct association between corporate giving and analyst earnings dispersion. KEYWORDSanalyst earnings dispersion, chaebol affiliated, corporate philanthropic giving, information environment, qualified donation expense

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“…The demand for charitable giving is burgeoning in this fast-developing, emerging market as consumers are becoming more conscious of their social commitments [21] and firms experience the benefits through CCG [2,3,14]. Some studies have focused on the impact of CCG on CP in China [9,10,22], but comparatively, little research has focused on the different effects of CCG on CP between state-owned firms (SOFs) and non-state-owned firms (NSOFs). Considering SOFs are prevalent in China [10,13] and, by nature, are connected to the government, the managers of those firms do not have to worry about political access and government protection compared to those of NSOFs [4,10].…”

Section: Introductionmentioning

confidence: 99%

Does Corporate Charitable Giving Help Sustain Corporate Performance in China?

Wang

Miao

et al. 2019

Sustainability

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We examined whether corporate charitable giving (CCG) in China benefits corporate performance (CP) in terms of sales growth (SG), return on asset (ROA), return on equity (ROE), and Tobin’s Q (TQ), and revealed several findings. First, testing shows variation in the impact of CCG on CP. Whereas the ratio of corporate charitable giving (RCCG) to total sales revenue does not significantly enhance SG, ROA, and ROE, it is positively related to TQ. Second, the positive relationship between RCCG and TQ originates from non-state-owned firms (NSOFs) rather than state-owned firms (SOFs). Third, Chinese firms may use CCG as traditional philanthropy to enhance long-term performance instead of strategically using it to generate short-term performance. Lastly, an inverted U-shaped relationship exists between RCCG and TQ, especially for NSOFs.

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Corporate Philanthropy and Stock Price Crash Risk: Evidence from China

Cited by 104 publications

References 54 publications

Principal–principal agency problems and stock price crash risk: Evidence from the split‐share structure reform in China

Principal–principal agency problems and stock price crash risk: Evidence from the split‐share structure reform in China

Does corporate philanthropic giving reduce analyst earnings dispersion? Evidence from Korea

Does Corporate Charitable Giving Help Sustain Corporate Performance in China?

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