Corporate Philanthropy, Ownership Type, and Financial Transparency

Corporate Philanthropy, Ownership Type, and FinancialTransparency

Cuili Qian • Xinzi Gao • Albert Tsang

Received: 19 April 2013 / Accepted: 29 January 2014

� Springer Science+Business Media Dordrecht 2014

Abstract Drawing on stakeholder theory and the concept

of enlightened self-interest, we argue that firms that

actively engage in corporate philanthropic giving also tend

to demonstrate greater concern for investors’ interests by

providing more transparent financial information and

avoiding corporate misconduct. Moreover, the relation-

ships between corporate giving, financial information

transparency, and corporate misconduct vary significantly

according to the firm’s ownership type, which affects the

fundamental motivations for corporate philanthropy. In a

sample of Chinese publicly listed firms from the

2003–2009 period, we find a positive relationship between

corporate giving and financial transparency, and note that

the relationship is stronger for non-state-owned enterprises

(non-SOEs). We also find a significantly negative associ-

ation between corporate giving and corporate misconduct

for non-SOEs, but not for SOEs. Taken together, these

findings suggest that responsibility to both stakeholders and

shareholders is a vital part of building trust and reputations

in China’s non-SOE sector.

Keywords Corporate philanthropy � Financial

transparency � Corporate misconduct � Ownership � Chinese

context

Introduction

In the wake of the Enron accounting scandal of early 2000

and those that quickly followed at Tyco, BMY, WorldCom,

Xerox, and Merck, many stakeholders—including

employees, customers, the media, and investors—began to

pay more attention to corporate financial transparency and

corporate misconduct, as firm insiders appeared increas-

ingly intent on misleading outsiders through opaque

financial reporting (Chih et al. 2008). Financial transpar-

ency is a measure of the amount of information in a firm’s

earnings numbers that reflect its true, but unobservable,

economic performance (Bhattacharya et al. 2003). Corpo-

rate misconduct is defined as corporate acts that deviate

from the prevailing legal or social norms of corporate

behavior; these may occur due to deliberate deviance or

unwarranted negligence, but are in either case done without

proper regard for the safety or interests of the parties

affected by those acts (Pozner 2008). Both corporate

financial opacity and misconduct lead to unrecovered

declines in shareholder wealth. Atkins (2006) suggests that

providing highly transparent financial information to

shareholders is one aspect of social responsibility. A firm’s

willingness to provide transparent information and avoid

misconduct are not only important to a firm’s shareholders,

but also to its other stakeholders such as employees, cus-

tomers, and communities, because highly transparent

financial information can reduce the extent to which cor-

porate insiders abuse their information advantage over

outsiders (Chih et al. 2008). Similarly, Gelb, and Strawser

(2001) argue that informative disclosure is necessary for

good stakeholder management. However, with the excep-

tion of these few studies, there is limited research in the

stakeholder management literature examining the rela-

tionship between corporate social behavior, in particular

C. Qian

Department of Management, City University of Hong Kong,

Kowloon Tong, Hong Kong

X. Gao (&)

Business School, Sun Yat-Sen University, Guangzhou, China

e-mail: [email protected]

A. Tsang

School of Accountancy, The Chinese University of Hong Kong,

Shatin, Hong Kong

123

J Bus Ethics

DOI 10.1007/s10551-014-2109-8

corporate philanthropy, corporate financial transparency,

and misconduct.

This study examines whether and how corporate phil-

anthropic activities are associated with corporate financial

transparency and misconduct. Corporate philanthropy,1 as

an important dimension of corporate social responsibility

(CSR) (Carroll 1999), has attracted a great deal of interest

from both practitioners and researchers over the past two

decades and has become the focus of much debate. Some

scholars contend that firms should not engage in corporate

philanthropy as it represents pure corporate expenditure

that diverts valuable corporate resources and distracts

managerial attention (Friedman 1970), or is used to boost

managers’ personal reputations (Galaskiewicz 1997; Haley

1991). Others claim that firms should actively engage in

philanthropy, as it enhances a firm’s reputation and moral

capital (Brammer and Millington 2005; Godfrey 2005;

Porter and Kramer 2002; Saiia et al. 2003), helps to attract

and retain talent (Sanchez 2000), motivates employees

(Balakrishnan et al. 2011), and better protects property

rights (Su and He 2010). Numerous studies have attempted

to establish a relationship between corporate philanthropy

and firm performance, but the empirical evidence remains

largely inconclusive. Some studies find a positive rela-

tionship (Lev et al. 2010; Orlitzky et al. 2003; Wokutch

and Spencer 1987), some find no relationship (Berman

et al. 1999; Griffin and Mahon 1997; Seifert et al. 2004),

and others suggest a curvilinear relationship (Brammer and

Millington 2005; Wang et al. 2008a). These mixed

empirical findings show that establishing causality between

corporate philanthropy and firm performance is no easy

task, and it is thus important that we identify and test the

specific mechanisms through which corporate philanthropy

may influence investors’ interests (Lev et al. 2010).

Accordingly, rather than directly examining corporate

philanthropy’s effect on bottom-line firm performance—

e.g., conventional return-on-investment criteria—this study

adopts a different approach to gain a better understanding

of the relationship between corporate philanthropy and the

returns to investors. Our objective is to examine whether

corporate philanthropic giving can benefit investors by

delivering more transparent and reliable financial infor-

mation and avoiding corporate misconduct. Building on

instrumental stakeholder theory,2 which states that firms

have an incentive to behave in a trustworthy, cooperative

manner, rather than opportunistically (Jones 1995), we

argue that corporate giving reflects a firm’s positive

response to stakeholder demands and that a giving firm will

also provide shareholders with more transparent informa-

tion and will be less likely to engage in corporate mis-

conduct. Through generous corporate giving, firms send a

positive signal that they will deal honestly with their

stakeholders and behave responsibly toward their share-

holders. In support of our argument, Kim et al. (2012) note

that socially responsible firms do indeed behave in a more

responsible manner and avoid aggressive earnings

management.

Moreover, McWilliams and Siegel (2001) develop the

argument that managers encounter frequent demands from

multiple stakeholder groups, and that they engage in

socially responsible activities at the firm level to meet

those demands. A primary reason for a firm’s positive

response to stakeholder demands is the recognition of the

relevance and importance of multiple stakeholders (Don-

aldson and Preston 1995; Mitchell et al. 1997; Sharma and

Henriques 2005). Therefore, the same amount of corporate

giving by different firms may reflect different levels of

priorities accorded to different stakeholder groups. The

salience of stakeholders to a firm or managers is normally

based on power, legitimacy, and urgency—all of which

define who and what really matter to the firm (Mitchell

et al. 1997). For some firms, such as privately owned firms,

engagement in corporate philanthropy may be driven by

considerations such as the need to behave ethically to win

stakeholders’ trust and build a reputation (Linthicum et al.

2010; Verschoor 2006). Accordingly, these firms are likely

to behave in a consistently responsible manner toward

investors by delivering transparent financial information

and not engaging in corporate misconduct. For other firms,

such as state-owned enterprises (SOEs), corporate giving

may simply be a response to political pressure from the

government (Sanchez 2000; Du et al. 2013), rather than

due to the economic consideration of performance maxi-

mization. In these cases, corporate giving may not be

associated with more transparent financial information and/

or less corporate misconduct.

We test these ideas in China’s transition economy. The

existing research on CSR in general and corporate phi-

lanthropy in particular has primarily been carried out in

Western contexts. China offers a promising setting for

examining the generalizability of the findings obtained in

developed economies because in China, corporate behavior

1 Following the definition of the U.S. Financial Accounting Stan-

dards Board (FASB), we define corporate philanthropy (also referred

to as corporate giving) as ‘‘an unconditional transfer of cash or other

assets to an entity or a settlement or cancellation of its liabilities in a

voluntary nonreciprocal transfer by another entity acting other than as

an owner’’ (FASB 1993; SFAS 116).2 The instrumental theory of stakeholder management is based on a

synthesis of the stakeholder concept, economic theory, behavioral

science, and ethics (Jones 1995, p. 404). It should be noted that in

Footnote 2 continued

spite of the instrumental nature of our arguments, this study does not

preclude ethically motivated corporate giving or any other related

socially responsible activities (Chiu and Sharfman 2011).

C. Qian et al.

123

such as philanthropic giving is largely influenced by the

government. For instance, in recent years, the Chinese

government has strongly encouraged corporations to

actively engage in socially responsible activities. As a

result, the country has witnessed substantial growth in

CSR-related activities such as corporate giving (Lin 2010;

Zhang et al. 2010).3 These activities are particularly

encouraged and important for SOEs because for many

years these firms were not only viewed as production units

or revenue centers, but also as providers of social services.

This was particularly the case before China launched its

economic reforms. Therefore, although the theoretical

arguments developed in this study are quite general, the

Chinese economy provides a useful socio-political context

in which to extend and test these arguments in a more

profound and fine-grained manner (Wang and Qian 2011).

In the next section, we first provide the theoretical

background of the research and then develop our hypoth-

eses. Our research design and empirical results are dis-

cussed in the subsequent section. We provide a discussion

on the study’s theoretical and practical implications in

‘‘Discussion’’ and conclude the paper in ‘‘Conclusion’’

section.

Theory and Hypothesis Development

Corporate Philanthropy, Financial Transparency,

and Corporate Misconduct

The growing influence of corporations on many aspects of

social, economic, and political life in recent years has led

to increased interest in the social consequences of corpo-

rate actions (Paine 2002; Rosen et al. 2003). As a result, a

growing number of stakeholders, including those who have

direct relationships with firms such as employees, cus-

tomers, suppliers, shareholders, and even the government,

have come to perceive corporate philanthropy as an

appropriate and legitimate corporate activity (Margolis and

Walsh 2003; Sharfman 1994; Wang and Qian 2011).

Corporate giving can be perceived as a means of building

better relations with primary stakeholders and eliciting

positive responses such as increased support (Berman et al.

1999; Haley 1991; Jones 1995; Saiia et al. 2003). Thus,

managers may expect corporate giving to generate moral

capital that in turn enhances firm value (Godfrey 2005;

Hillman and Keim 2001). Firms and their managers have

an incentive to demonstrate a commitment to ethics by

engaging in good CSR practices such as corporate giving

and, at the same time, to adhere to a high standard of

ethical behavior in all other corporate decisions (Jones

1995). Rather than examining how investors benefit from

corporate giving by investigating the giving-performance

relationship, we examine corporate giving’s effect on the

transparency of the financial information provided to

stakeholders, particularly shareholders, as their interests

are more directly affected by information transparency.

We argue that a firm that expends effort on building a

good image and accumulating moral capital is unlikely to

demonstrate such responsibility to its stakeholders at large,

but not to its shareholders or investors, or vice versa. In our

view, engaging in corporate philanthropic activities (for

example, providing generous financial support to sports

and the arts and/or to environmental protection, human

rights, or poverty-alleviation initiatives) and providing

high-quality financial information are both important ways

for a firm to build trust and a positive image. Socially

responsible firms focus not only on increasing current

profits, but also on nurturing future relationships with

stakeholders (Chih et al. 2008). Shleifer (2004) also points

out that earnings management—one indicator of financial

transparency—is less likely to occur in firms with a strong

commitment to social responsibility because many stake-

holders consider earnings management to be ethically

objectionable. Consistent with this argument, in a com-

prehensive investigation of the relationship between good

CSR practices, measured on the basis of KLD ratings, and

the financial reporting quality of U.S. firms, Kim et al.

(2012) find that firms with good CSR practices do indeed

behave in a more responsible manner by constraining

earnings management and, as a result, provide high-quality

accounting information.4

A number of studies also argue that engaging in cor-

porate philanthropic activities can be opportunistic and

potentially linked to a manager’s pursuit of self-interest

(Jensen and Meckling 1976; McWilliams et al. 2006;

Hemingway and Maclagan 2004). For example, Brown

et al. (2006) suggest that agency costs play a prominent

role in explaining corporate giving activities. Consistent

with this view, Petrovits (2006) shows that managers use

their discretion on corporate philanthropic activities to

manipulate earnings numbers by making foundation fund-

ing choices opportunistically, i.e., some managers may

engage in earnings management while involved in philan-

thropic activities. This explanation may be plausible and

lead to the conclusion that there may be no clear rela-

tionship between corporate giving and the quality of

3 In December 2007, the State-owned Assets Supervision and

Administration Commission of the State Council (SASAC) released

an official guide on CSR implementation for SOEs controlled by the

central government. Further, in 2008, both the Shanghai and

Shenzhen Stock Exchanges issued guidelines encouraging listed

companies in China to engage in more CSR activities.

4 Shleifer (2004) and Gelb and Strawser (2001) also find that socially

responsible firms provide better/more accounting information.

Corporate Philanthropy, Ownership Type, and Financial Transparency

123

corporate financial information and corporate misconduct.

However, drawing on the instrumental stakeholder theory

perspective, which emphasizes that a firm’s survival and

continuing profitability depend on its ability to fulfill its

economic and social purpose, we posit that when firms are

actively engaged in corporate social activities such as

philanthropic giving, they are less likely to cheat or lie to

stakeholders, including investors, and more likely to

behave responsibly toward them (Clarkson 1995; Jones

1995). In other words, firms that are motivated to make

generous contributions by reputational concerns are likely

to promote a socially responsible public image, and this

motivation is also likely to extend to other business prac-

tices that demonstrate responsibility, such as the provision

of a high level of financial transparency to investors. We,

therefore, predict the following.

H1 Corporate giving is positively associated with finan-

cial transparency.

Similar logic can be applied to the relationship between

corporate giving and corporate misconduct. In this study,

corporate misconduct refers specifically to corporate vio-

lations of security laws and regulations because the inci-

dence of violations and level of enforcement action taken

by the authorities represent a more aggressive form of

providing lower-quality financial information (Kim et al.

2012). A firm’s reputation can be diminished through

misconduct such as violating regulations. Williams and

Barrett (2000) investigate the influence of corporate giving

on the link between corporate misconduct and corporate

reputation. In a sample of firms that violated U.S. Envi-

ronmental Protection Agency and Occupational Safety and

Health Administration regulations during the 1991–1994

period, they find that the violations negatively affected

corporate reputations, but that the extent of the effect was

reduced through corporate giving. Another study of firms

violating the SEC rules in Accounting and Auditing

Enforcement Releases (AAERs) during the 1982–2000

period finds no increases in analyst following or institu-

tional holdings in firms that engaged in misconduct, sug-

gesting that these firms suffered large losses in credibility

and reputation (Farber 2005). More seriously, a firm may

also suffer a direct economic loss. For instance, using the

event analysis technique, Davidson and Worrell (1988) find

that the market reacts negatively to the release of corporate

crime news because investors expect the firm in question to

incur fines and penalties and/or to lose sales revenues from

socially conscious buyers. Using a sample of Chinese listed

firms, Chen et al. (2005) find that firms’ stock prices

decline when the regulator takes enforcement action

against firms for financial fraud.

Therefore, arguing from the instrumental stakeholder

and enlightened self-interest perspectives, we posit that if a

firm values the moral capital it has accumulated from

corporate giving, the desire to protect that reputation will

inhibit it from engaging in socially unacceptable activities

such as violating the regulations set by the relevant

authorities. Accordingly, managers who use corporate

giving to enhance firm reputation and win stakeholder

support will constrain unethical behavior to reduce the

potential for reputational damage (Kim et al. 2012).

H2 Corporate giving is negatively associated with cor-

porate misconduct.

Corporate Giving and Type of Ownership in China

In addition to a dramatic improvement in economic con-

ditions, China has also undergone great changes in its

social and environmental conditions over the past two

decades. In China, the government, academia, the media,

and business associations all explicitly recognize the

importance of CSR/corporate philanthropy and, accord-

ingly, have dedicated efforts to promoting CSR-related

actions (Lin 2010). Particularly, since joining the World

Trade Organization, the country’s most powerful stake-

holder, the Chinese government, has issued a number of

CSR guidelines and initiatives for large companies to adopt

as a strategy to balance the social and environmental

impacts of extensive economic growth. For example, in

2006, the Shenzhen Stock Exchange issued a ‘‘Guide on

Listed Companies’ Social Responsibility’’ to all firms lis-

ted on the exchange, and in 2008 further issued the ‘‘Notice

on Strengthening Social Responsibility of Listed Compa-

nies.’’ Similarly, in 2008, the Shanghai Stock Exchange

mandated that three types of listed companies must issue

CSR reports on an annual basis starting from the fiscal year

2008. These firms include companies listed on the Shang-

hai Stock Exchange Corporate Governance Index, com-

panies with shares cross-listed overseas, and all financial

companies. Moreover, a guide released by the SASAC in

2007 outlines the Chinese central government’s official

attitude toward good CSR.5About 150 large SOEs are still

under direct central government control, and they are all

subject to the guide.

The Chinese government strongly encourages corporate

giving because such giving helps to reduce the govern-

ment’s community and social welfare burdens, for which it

has insufficient resources (Dickson 2003). From the gov-

ernment’s perspective, charitable contributions by SOEs

can both promote a socially responsibility public image for

the government and reduce its financial burden. In addition,

SOEs in China are not only viewed as business enterprises,

5 See http://www.sasac.gov.cn/n1180/n1566/n259760/n264851/3621

925.html.

C. Qian et al.

123

http://www.sasac.gov.cn/n1180/n1566/n259760/n264851/3621925.html

http://www.sasac.gov.cn/n1180/n1566/n259760/n264851/3621925.html

but they are also considered to be the backbone of the

country’s economic and social stability. Consistent with

these arguments, Fang et al. (2011) report that firms with

stronger connections to the Chinese government are more

likely to make charitable donations, indicating that SOEs’

contribution decisions are at least partially driven by the

desire to fulfill their corporate and social obligations (Luo

and Zhang 2009). Wang and Qian (2011) further demon-

strate that not all Chinese firms engaging in corporate

giving activities actually receive equal benefits from those

activities, which supports the conjecture that the corporate

philanthropy of firms with different ownership structures

may be driven by different factors. SOEs characterized by

strong political attachments and connections may make

charitable contributions simply to fulfill their social obli-

gations to the Chinese government (Du et al. 2013). As a

result, the corporate giving of SOEs may not reflect their

general concerns about or responses to various stakehold-

ers. If this is the case, then whether and the extent to which

these firms engage in corporate giving should have no

association with corporate financial transparency or cor-

porate misconduct.

At the same time, non-SOEs in China are also actively

involved in corporate giving activities (Zhang et al. 2010).

However, unlike their SOE counterparts, studies show that

these firms adopt corporate philanthropic activities strate-

gically (Luo and Zhang 2009). Corporate giving is a tool not

only for building political connections with the government,

but also for enhancing their reputations and establishing

legitimacy in the eyes of stakeholders, including the gov-

ernment, employees, customers, the community, and inves-

tors (Ahlstrom et al. 2000; Peng and Luo 2000; Xin and

Pearce 1996).6 More importantly, unlike SOEs, whose

operations and interests are well protected and supported by

the government, non-SOEs face a much higher competitive

disadvantage in the marketplace and thus experience greater

difficulty in maintaining profitability and sustainability.

Therefore, non-SOEs have a greater need to build a

responsible business image and signal their ethical business

practices by actively engaging in corporate philanthropic

activities because such engagement helps the firms to

improve their reputations and build trust with their stake-

holders and shareholders. A responsible and ethical image is

important to non-SOEs because continued support from

shareholders and other stakeholders is vital to their operating

environment and sustainability.7

The need to signal responsiveness and ethics has been

particularly great for Chinese firms in recent years, fol-

lowing a series of product-related scandals that have led to

a low degree of confidence in the ‘‘Made in China’’ brand;

as such the ‘‘Made in China’’ brand is now often associated

with negative image such as sweatshop labor conditions,

irresponsible production processes, and poor product

quality (Lin 2010). In sum, for non-SOEs, corporate giving

decisions are more likely to be motivated by the desire to

create a good reputation and accumulate moral capital with

stakeholders and the government rather than a passive

response to government pressure. For the same reasons, we

expect that non-SOEs are also likely to have a greater

incentive to demonstrate concern for their investors by

delivering more transparent financial information and

avoiding violations of the securities regulations. However,

for SOEs, as corporate giving decisions could be driven by

reasons other than reputational concern, we expect a

weaker or no association between corporate giving and

quality of financial information/misconduct. Consistent

with our argument, a recent study by Du et al. (2013) states

that ‘‘SOEs have passive, involuntary attitudes toward

philanthropic giving. In comparison, for non-SOEs, cor-

porate philanthropic giving tends to be voluntary and

strategic for enhancing reputation, gaining popularity,

increasing market share, and improving future financial

performance.’’ We state our last hypothesis as the

following.

H3a The positive relationship between corporate giving

and financial transparency is stronger for non-SOEs.

H3b The negative relationship between corporate giving

and corporate misconduct is stronger for non-SOEs.

Research Design

Sample

Our sample comprised all of the Chinese firms listed on

either the Shenzhen or Shanghai Stock Exchange during

the 2003–2009 period. Several sources were used to collect

the data. We collected the corporate giving data from the

sample firms’ annual reports, which were obtained from the

official websites of the two exchanges and the China

Securities Regulatory Commission (CSRC). The data on

financial transparency, corporate misconduct, and the

control variables were obtained from the CSRC and the6 Building close ties with the government helps non-SOEs to

overcome many obstacles to smooth business operations, secure

better property rights protection, and ultimately achieve better

financial performance and an increase in firm value (Fisman 2001;

Su and He 2010).7 In contrast to China’s non-SOEs, its SOEs are strongly attached to

the political regime through many channels, and thus encounter less

Footnote 7 continued

difficulty in accessing the product and capital markets (Wang et al.

2008b), obtaining favorable regulations (Agrawal and Knoeber 2001),

accessing bank loans (Faccio 2006; Khwaja and Mian 2005), and

securing property rights protection (Su and He 2010).


123

China Stock Market and Accounting Research database.

After merging the data and deleting missing values, our

final sample comprised 5,298 firm-year observations with

non-missing variables for multivariate analysis. Please

refer to Table 1 for the detailed sample selection procedure

and the final sample’s distribution by year and industry.8

Measures

Dependent Variables

Our first dependent variable was financial opacity. Follow-

ing previous studies, we used earnings smoothing, loss

avoidance, and earnings aggressiveness to measure financial

opacity (Bhattacharya et al. 2003; Chih et al. 2008; Leuz

et al. 2003). To facilitate comparison when using different

dependent variables, we ranked all three financial opacity

variables across years into percentiles, with higher ranks

associated with greater earnings smoothing, loss avoidance,

and earnings aggressiveness. We also calculated the average

Table 1 Sample selection Panel A: Sample selection process

2003 2004 2005 2006 2007 2008 2009 Total

Number of year-end Chinese A-share

listed firms

1,210 1,310 1,324 1,390 1,516 1,593 1,692 10,035

Exclude:

Firms without donation 609 652 633 600 659 260 634 4,047

Finance industry 5 5 5 6 15 24 28 88

Book value of equity is negative 6 3 13 14 15 24 14 89

Missing data 39 63 17 42 101 142 109 513

Final sample 551 587 656 728 726 1,143 907 5,298

Panel B: Sample distribution by industry

CSRC

code

CSRC industry name SIC equivalent # of obs. Percentage

(%)

A Agriculture, forestry and

fishery

01,02,07,08,09 162 3.058

B Mining 10,12,13,14 112 2.114

C0 Food and beverage 20 237 4.473

C1 Textiles and apparel 22,23 244 4.606

C2 Wood and furnishing 25 15 0.283

C3 Paper and printing 26,27 119 2.246

C4 Petrochemicals 28,29,30 558 10.532

C5 Electronics 36 179 3.379

C6 Metals and non-metals 32,33,34 444 8.381

C7 Machinery 35,36,37 779 14.704

C8 Pharmaceuticals 38 397 7.493

C9 Other manufacturing 39 61 1.151

D Utilities 49 272 5.134

E Construction 15,16,17 135 2.548

F Transportation 40,41,42,44,45,46,47 207 3.907

G IT 48 268 5.059

H Wholesale and retail trade 50,51,52,53,54,55,56,57,58,59 385 7.267

I Finance 60,61,62,63,64,67

J Real estate 65 244 4.606

K Social Services 43,70,80,82,83 158 2.982

L Broadcasting and culture 78,79,84 32 0.604

M Conglomerate 290 5.474

Total 5,298 100.00

8 Panel A of Table 1 shows that the number of firms that make

donations (or do not make donations) in 2008 is significantly different

from other years, possibly due to the earthquake in Wenchuan China

that occurred that year (Gao et al. 2012). To check the robustness of

our results, in an additional test (untabulated) we remove all of the

observations from 2008 and obtain quantitatively similar results.

C. Qian et al.

123

rank scores of all three financial opacity measures, and used

the average rank as the measure of overall financial opacity

(see the Appendix for variable definitions). Financial trans-

parency was defined as the inverse of financial opacity, and

thus firms with a lower likelihood of earnings smoothing,

loss avoidance, or earnings aggressiveness (i.e., a lower

level of financial opacity) were considered to demonstrate a

high level of financial transparency.

The second dependent variable was corporate miscon-

duct, which was measured by the CSRC enforcement.

Similar to the SEC in the U.S., the CSRC is the regulatory

body that enforces securities laws and regulations in China

and carries out investigations to identify and prosecute

securities fraud. Chen et al. (2005) find that firms subject to

enforcement actions suffer negative stock returns and

costly economic consequences, suggesting that the CSRC’s

fraud investigations have credibility. We used two vari-

ables to measure corporate misconduct: a measure of

whether a firm had been investigated (i.e., the incidence of

a CSRC investigation), and a measure of what type of

enforcement action the CSRC had taken against a firm (i.e.,

the level of enforcement action determined by the CSRC).

A dummy variable named D_Enforce was coded as ‘‘1’’ if

the CSRC had taken enforcement action against a focal

firm in a particular year, and ‘‘0’’ otherwise. The level of

enforcement following a CSRC investigation was coded by

enforcement type as an ordinal variable (Enforce): public

criticism (= 1), public condemnation/public censure (= 2),

administrative punishment (= 3), filing a case for further

investigation (= 4), warning (= 5), penalty/fine (= 6),

cancellation of securities business permit and ordered to

close down (= 7), and others.9 We used the type of CSRC

enforcement to measure the severity of the regulatory

violations. A higher type of enforcement action indicated a

more severe violation and thus a higher level of corporate

misconduct. Our sample included only the first six types of

enforcement.10

Independent Variables

Corporate giving was measured as the total amount of a

firm’s charitable contributions scaled by total assets to

control for organizational size, as previous studies suggest

that size-adjusted giving can be interpreted as a measure of

firm generosity (Chen et al. 2008; Griffin and Mahon 1997;

Navarro 1988).11 As more than half of the sample firms’

annual contributions were less than 0.01 percent of their

total assets, we also converted the raw corporate giving

variable into a percentile rank for each year to ease con-

cerns over influential outliers. In a robustness test, we also

performed all of our tests again using the un-ranked giving

variables instead of the ranked variables and obtained

similar results, albeit with a slightly lower significance

level. We used the variable STATE to indicate an SOE.

STATE took a value of ‘‘1’’ if the ultimate owner of the firm

was government, and ‘‘0’’ otherwise (Wang et al. 2008b).

As both the central and local levels of government in China

can have strong administrative influence on corporate

decisions (Du et al. 2013), we further categorized STATE

into Central and Local. Local was a dummy variable that

was coded as ‘‘1’’ if the ultimate controller of the firm was

the local government, and ‘‘0’’ otherwise. Similarly,

Table 2 Descriptive statistics

Mean Non-

SOE

SOE Diff

(Non-

SOE -

SOE)

p value

(Diff)

Overall financial

opacity (OP)

1.477 1.470 1.481 -0.011 0.458

Earnings

aggressiveness

(EA)

0.490 0.524 0.474 0.049 0.000

Loss avoidance

(LA)

0.497 0.476 0.506 -0.030 0.000

Earnings

smoothing (ES)

0.491 0.470 0.501 -0.030 0.000

D_Enforce 0.033 0.048 0.027 0.021 0.000

Enforce 0.094 0.116 0.083 0.033 0.079

GIVING 0.494 0.559 0.465 0.094 0.000

SIZE 21.590 21.245 21.743 -0.498 0.000

LEV 0.516 0.506 0.520 -0.014 0.009

TOP1 0.381 0.323 0.407 -0.084 0.000

MTB 2.978 3.565 2.709 0.857 0.000

ADJROA 0.001 0.007 -0.002 0.010 0.000

EO 0.076 0.093 0.069 0.024 0.002

BIG4 0.049 0.022 0.061 -0.040 0.000

XLIST 0.082 0.040 0.102 -0.062 0.000

MO 0.021 0.063 0.002 0.061 0.000

BOARD 0.352 0.359 0.349 0.010 0.000

9 In seven cases among the samples with D_Enforce = 1, the level of

enforcement imposed by CSRCwas recorded as ‘‘Others’’; as such we

drop these seven observations in all the tests which use Enforce as

dependent variable (i.e., model 6-10 in Table 6).10 Our final sample included 51, 64, 1, 2, 1, and 50 observations with

Enforce equal to 1, 2, 3, 4, 5, and 6, respectively; there were no cases

where Enforce was equal to 7.

11 Some studies on corporate giving also use the total dollar value of

the contribution (Seifert et al. 2003) or total giving scaled by sales

(Brown et al. 2006; Wokutch and Spencer 1987) to measure corporate

giving activities. We conducted an additional robustness test using

these measures and obtained similar results.


123

Ta

ble

3C

orr

elat

ion

of

var

iab

les

OP

EA

LA

ES

D_

En

forc

eE

nfo

rce

GIV

ING

ST

AT

ES

IZE

LE

VT

OP

1M

TB

AD

JRO

AE

OB

IG4

XL

IST

MO

EA

0.5

49

(0.0

0)

LA

0.6

01

-0

.01

0

(0.0

0)

(0.4

5)

ES

0.6

12

-0

.02

20

.08

6

(0.0

0)

(0.1

1)

(0.0

0)

D_

En

forc

e0

.00

60

.01

40

.00

8-

0.0

11

(0.6

5)

(0.3

1)

(0.5

5)

(0.4

3)

En

forc

e0

.00

60

.00

10

.01

3-

0.0

04

0.8

12

(0.6

8)

(0.9

1)

(0.3

6)

(0.7

8)

(0.0

0)

GIV

ING

-0

.03

20

.02

6-

0.0

26

-0

.05

6-

0.0

07

-0

.01

9

(0.0

2)

(0.0

6)

(0.0

6)

(0.0

0)

(0.6

1)

(0.1

7)

ST

AT

E0

.01

0-

0.0

82

0.0

51

0.0

49

-0

.05

4-

0.0

24

-0

.15

2

(0.4

6)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

8)

(0.0

0)

SIZ

E-

0.0

35

-0

.09

10

.00

70

.02

2-

0.0

66

-0

.04

1-

0.1

04

0.2

15

(0.0

1)

(0.0

0)

(0.6

2)

(0.1

1)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

LE

V-

0.0

71

-0

.15

6-

0.0

04

0.0

35

0.0

53

0.0

60

-0

.10

20

.03

60

.27

0

(0.0

0)

(0.0

0)

(0.7

7)

(0.0

1)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

1)

(0.0

0)

TO

P1

0.0

07

-0

.04

80

.03

60

.02

4-

0.0

65

-0

.05

4-

0.0

77

0.2

48

0.2

13

-0

.04

3

(0.6

3)

(0.0

0)

(0.0

1)

(0.0

8)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

MT

B0

.04

30

.02

10

.02

20

.03

30

.05

90

.05

40

.07

1-

0.1

37

-0

.13

90

.12

3-

0.0

82

(0.0

0)

(0.1

3)

(0.1

2)

(0.0

2)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

AD

JRO

A-

0.0

30

-0

.03

4-

0.0

13

-0

.00

6-

0.1

59

-0

.12

70

.12

8-

0.0

72

0.1

39

-0

.31

30

.08

1-

0.0

15

(0.0

3)

(0.0

1)

(0.3

4)

(0.6

7)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.2

6)

EO

-0

.02

0-

0.0

44

0.0

04

0.0

05

-0

.03

4-

0.0

29

0.0

40

-0

.04

30

.08

20

.09

20

.01

00

.12

10

.06

2

(0.1

4)

(0.0

0)

(0.7

9)

(0.7

4)

(0.0

2)

(0.0

4)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.4

5)

(0.0

0)

(0.0

0)

BIG

4-

0.0

04

-0

.02

60

.00

70

.01

3-

0.0

37

-0

.03

2-

0.0

14

0.0

85

0.3

66

-0

.01

90

.10

0-

0.0

51

0.0

50

0.0

17

(0.7

8)

(0.0

6)

(0.6

0)

(0.3

6)

(0.0

1)

(0.0

2)

(0.3

0)

(0.0

0)

(0.0

0)

(0.1

8)

(0.0

0)

(0.0

0)

(0.0

0)

(0.2

1)

XL

IST

0.0

12

0.0

12

-0

.01

30

.02

20

.01

40

.02

-0

.04

60

.10

50

.23

30

.01

70

.02

2-

0.0

25

-0

.02

2-

0.0

27

0.3

66

(0.3

7)

(0.4

0)

(0.3

6)

(0.1

1)

(0.3

2)

(0.1

5)

(0.0

0)

(0.0

0)

(0.0

0)

(0.2

3)

(0.1

2)

(0.0

7)

(0.1

1)

(0.0

5)

(0.0

0)

MO

-0

.03

20

.02

9-

0.0

31

-0

.05

40

.02

5(0

.00

)50

.11

2-

0.3

22

-0

.13

3-

0.1

24

-0

.11

60

.07

00

.12

90

.05

5-

0.0

24

-0

.06

9

(0.0

2)

(0.0

4)

(0.0

2)

(0.0

0)

(0.0

7)

(0.7

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

0)

(0.0

9)

(0.0

0)

BO

RA

D0

.01

40

.01

4-

0.0

05

0.0

15

0.0

19

0.0

23

-0

.01

4-

0.0

87

0.0

52

0.0

00

-0

.01

60

.06

30

.02

30

.04

00

.03

30

.04

70

.07

0

(0.3

2)

(0.3

0)

(0.7

0)

(0.2

7)

(0.1

6)

(0.1

0)

(0.3

2)

(0.0

0)

(0.0

0)

(1.0

0)

(0.2

4)

(0.0

0)

(0.0

9)

(0.0

0)

(0.0

2)

(0.0

0)

(0.0

0)

OP

Ov

eral

lF

inan

cial

Op

acit

y,

EA

Ear

nin

gs

Ag

gre

ssiv

enes

s,L

AL

oss

Av

oid

ance

,E

SE

arn

ing

sS

mo

oth

ing

Th

ep-v

alu

eo

fth

eco

rrel

atio

nis

rep

ort

edin

par

enth

eses

C. Qian et al.

123

Central was coded as ‘‘1’’ if the ultimate controller of the

firm was the central government, and ‘‘0’’ otherwise.

In line with previous studies, we also controlled for a

series of firm and managerial level variables that may

affect a firm’s financial information transparency and

misconduct (Kim et al. 2012; Wang and Yung 2011). Firm

size (size) was measured as the natural logarithm of year-

end total assets. Financial leverage (LEV) was computed as

the ratio between year-end total liabilities and total assets.

We also controlled for the ownership percentage of the

largest shareholder (TOP1). Market-to-book value (MTB)

was measured as market value divided by the book value of

Table 4 Regression analysis of

the impact of corporate giving

on overall financial opacity

Note t-statistics are in

parentheses (two-tailed test).

* p \ 0.05; ** p \ 0.01;

*** p \ 0.001

Model 1 Model 2 Model 3 Model 4 Model 5

STATE = 0 STATE = 1

GIVING -0.080***

(-3.56)

-0.175***

(-4.46)

-0.175***

(-4.46)

-0.157***

(-3.97)

-0.014

(-0.47)

STATE -0.054

(-1.86)

STATE*GIVING 0.144***

(2.99)

LOCAL -0.034

(-1.14)

CENTRAL -0.106**

(-2.76)

LOCAL*GIVING 0.099*

(1.96)

CENTRAL*GIVING 0.274***

(4.13)

SIZE 0.001

(0.13)

0.001

(0.10)

0.002

(0.22)

-0.009

(-0.56)

0.002

(0.25)

LEV -0.317***

(-7.39)

-0.324***

(-7.50)

-0.328***

(-7.58)

-0.313***

(-3.84)

-0.343***

(-6.41)

TOP1 0.031

(0.71)

0.018

(0.42)

0.007

(0.16)

-0.168

(-1.88)

0.097

(1.75)

MTB 0.015***

(5.09)

0.015***

(5.39)

0.015***

(5.41)

0.015***

(3.11)

0.013***

(3.30)

ADJROA -0.413***

(-3.52)

-0.430***

(-3.71)

-0.425***

(-3.68)

-0.065

(-0.32)

-0.532***

(-3.66)

EO -0.020

(-0.85)

-0.025

(-1.05)

-0.023

(-0.99)

0.04

(1.03)

-0.047

(-1.55)

BIG4 -0.016

(-0.58)

-0.017

(-0.62)

-0.020

(-0.73)

0.053

(0.84)

-0.022

(-0.62)

XLIST 0.019

(0.91)

0.021

(0.99)

0.019

(0.91)

0.136***

(2.79)

0.005

(0.19)

MO -0.270***

(-3.55)

-0.222**

(-2.97)

-0.223***

(-2.99)

-0.301***

(-3.63)

-0.27

(-0.47)

BOARD -0.049

(-0.40)

-0.024

(-0.20)

-0.012

(-0.10)

0.186

(0.83)

-0.145

(-0.90)

Constant 1.636***

(9.84)

1.678***

(10.00)

1.663***

(9.89)

1.706***

(4.98)

1.651***

(7.89)

Industry dummy Yes Yes Yes Yes Yes

Year dummy Yes Yes Yes Yes Yes

No. of observations 5,298 5,298 5,298 1,663 3,635

Adjusted R2 0.041 0.045 0.046 0.056 0.039


123

total equity at the year-end. Return on assets (ADJROA)

was measured as net income over total assets, adjusted by

the industry median. Equity offering (EO) was a dummy

variable coded as ‘‘1’’ if the firm had an equity offering in

the subsequent year, and ‘‘0’’ otherwise. BIG4 was a

dummy variable taking a value of ‘‘1’’ if the firm was

audited by a Big 4 auditor, and ‘‘0’’ otherwise. A dummy

variable named XLIST was included to control for whether

a firm had issued B-shares or H-shares. The equity owned

by the top managers (MO) and the percentage of inde-

pendent outside directors (BOARD) were also controlled

for. We also included year and industry indicators in all of

Table 5 Regression analysis of the impact of corporate giving on each dimension of financial opacity

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8 Model 9

Earnings aggressiveness Loss avoidance Earnings smoothing

GIVING 0.018

(1.47)

0.010

(0.44)

0.010

(0.46)

-0.031**

(-2.18)

-0.071**

(-3.00)

-0.070**

(-2.99)

-0.069***

(-4.71)

-0.138***

(-5.50)

-0.140***

(-5.57)

STATE -0.042**

(-2.69)

-0.003

(-0.20)

-0.035

(-1.84)

STATE*GIVING 0.011

(0.40)

0.072**

(2.49)

0.108***

(3.53)

LOCAL -0.034**

(-2.02)

0.007

(0.36)

-0.035

(-1.74)

CENTRAL -0.063***

(-3.21)

-0.025

(-1.12)

-0.041

(-1.68)

LOCAL*GIVING -0.007

(-0.26)

0.060*

(1.95)

0.095**

(2.93)

CENTRAL*GIVING 0.056

(1.62)

0.090**

(2.28)

0.147***

(3.54)

SIZE 0.005

(0.94)

0.007

(1.50)

0.007

(1.53)

-0.004

(-0.80)

-0.006

(-1.26)

-0.005

(-1.12)

0.004

(0.77)

0.003

(0.63)

0.003

(0.63)

LEV -0.470***

(-19.62)

-0.477***

(-19.90)

-0.474***

(-19.77)

-0.017

(-0.65)

-0.019

(-0.74)

-0.019

(-0.73)

0.050

(1.72)

0.054

(1.85)

0.050

(1.74)

TOP1 -0.047

(-1.90)

-0.027

(-1.06)

-0.027

(-1.07)

0.052*

(2.03)

0.034

(1.32)

0.037

(1.42)

0.030

(1.02)

0.025

(0.87)

0.021

(0.72)

MTB 0.006***

(3.62)

0.006***

(3.35)

0.006***

(3.30)

0.003

(1.79)

0.004*

(2.41)

0.004*

(2.50)

0.007***

(3.73)

0.007***

(3.95)

0.007***

(3.84)

ADJROA -0.584***

(-8.86)

-0.627***

(-9.93)

-0.626***

(-9.89)

-0.084

(-1.20)

-0.062

(-0.88)

-0.063

(-0.89)

0.069

(0.93)

0.097

(1.30)

0.095

(1.28)

EO -0.027*

(-1.97)

-0.027*

(-1.96)

-0.027*

(-1.97)

0.006

(0.44)

0.012

(0.84)

0.009

(0.66)

0.000

(0.02)

-0.003

(-0.22)

-0.004

(-0.24)

BIG4 -0.048**

(-2.47)

-0.049**

(-2.48)

-0.050**

(-2.51)

0.005

(0.29)

0.005

(0.34)

0.008

(0.47)

0.006

(0.31)

0.006

(0.33)

0.003

(0.16)

XLIST 0.034**

(2.21)

0.038**

(2.41)

0.037**

(2.38)

-0.022

(-1.83)

-0.026*

(-2.11)

-0.026*

(-2.12)

0.012

(0.87)

0.010

(0.72)

0.010

(0.72)

MO 0.004

(0.09)

-0.037

(-0.85)

-0.037

(-0.86)

-0.123**

(-2.82)

-0.078

(-1.74)

-0.078

(-1.74)

-0.198***

(-4.11)

-0.164***

(-3.39)

-0.162***

(-3.34)

BOARD -0.058

(-0.82)

-0.063

(-0.89)

-0.069

(-0.98)

-0.025

(-0.31)

-0.022

(-0.28)

-0.023

(-0.29)

0.155*

(2.00)

0.162*

(2.08)

0.174*

(2.24)

Constant 0.633***

(6.14)

0.602***

(5.75)

0.596***

(5.70)

0.547***

(5.66)

0.588***

(6.11)

0.574***

(5.91)

0.386***

(3.52)

0.419***

(3.84)

0.422***

(3.87)

Industry dummy Yes Yes Yes Yes Yes Yes Yes Yes Yes

Year dummy Yes Yes Yes Yes Yes Yes Yes Yes Yes

No. of observations 5,298 5,298 5,298 5,298 5,298 5,298 5,298 5,298 5,298

Adjusted R2 0.169 0.171 0.170 0.019 0.023 0.023 0.018 0.021 0.022

Note t-statistics are in parentheses (two-tailed test). * p \ 0.05; ** p \ 0.01; *** p \ 0.001

C. Qian et al.

123

Ta

ble

6A

nal

ysi

so

fco

rpo

rate

giv

ing

on

corp

ora

tem

isco

nd

uct

Mo

del

1M

od

el2

Mo

del

3

D_

En

forc

e

Mo

del

4M

od

el5

Mo

del

6M

od

el7

Mo

del

8

En

forc

ele

vel

Mo

del

9M

od

el1

0

ST

AT

E=

0S

TA

TE

=1

ST

AT

E=

0S

TA

TE

=1

GIV

ING

0.0

31

(0.1

0)

-0

.45

8

(-1

.03

)

-0

.46

0

(-1

.03

)

-0

.57

2

(-1

.36

)

0.4

23

(1.0

5)

-0

.02

1

(-0

.62

)

-0

.12

3*

(-1

.80

)

-0

.12

3*

(-1

.80

)

-0

.14

7*

*

(-2

.16

)

0.0

31

(0.8

5)

ST

AT

E-

0.8

69

*

(-2

.50

)

-0

.10

0*

(-2

.02

)

ST

AT

E*

GIV

ING

0.8

11

(1.3

9)

0.1

48

*

(1.9

2)

LO

CA

L-

0.7

65

*

(-2

.09

)

-0

.09

0

(-1

.74

)

CE

NT

RA

L-

1.1

97

*

(-2

.21

)

-0

.12

8*

(-2

.22

)

LO

CA

L*

GIV

ING

0.6

88

(1.1

0)

0.1

19

(1.4

8)

CE

NT

RA

L*

GIV

ING

1.2

11

(1.2

9)

0.2

38

*

(2.2

5)

SIZ

E-

0.2

83

*

(-2

.52

)

-0

.25

3*

(-2

.21

)

-0

.24

7*

(-2

.15

)

-0

.14

0

(-0

.76

)

-0

.33

0*

(-2

.20

)

-0

.00

9

(-0

.79

)

-0

.00

7

(-0

.62

)

-0

.00

8

(-0

.64

)

0.0

08

(0.3

1)

-0

.01

9

(-1

.45

)

LE

V1

.37

8*

(2.1

0)

1.3

19

*

(2.0

1)

1.3

15

*

(2.0

0)

0.8

90

(0.9

1)

2.1

90

**

(2.6

1)

0.0

78

(0.9

9)

0.0

73

(0.9

2)

0.0

73

(0.9

2)

0.0

37

(0.2

5)

0.1

39

(1.6

2)

TO

P1

-

2.0

00

**

*

(-3

.08

)

-1

.67

1*

(-2

.55

)

-1

.68

0*

(-2

.55

)

-1

.17

0

(-1

.19

)

-1

.65

2*

(-1

.96

)

-0

.14

6*

(-2

.27

)

-0

.13

0*

(-2

.04

)

-0

.13

3*

(-2

.07

)

-0

.19

0*

(-1

.95

)

-0

.05

9

(-0

.73

)

MT

B0

.01

5

(0.5

2)

0.0

13

(0.4

6)

0.0

14

(0.5

0)

0.0

57

(1.4

7)

-0

.04

7

(-0

.93

)

0.0

12

(1.8

8)

0.0

12

(1.9

0)

0.0

12

(1.8

7)

0.0

23

*

(2.0

3)

0.0

03

(0.3

7)

AD

JRO

A-

5.9

90

**

*

(-6

.16

)

-

6.2

16

**

*

(-6

.12

)

-6

.20

2*

**

(-6

.10

)

-4

.28

6*

*

(-2

.99

)

-7

.35

6*

**

(-5

.72

)

-

1.1

21

**

*

(-4

.02

)

-

1.1

25

**

*

(-4

.02

)

-1

.12

2*

**

(-4

.01

)

-0

.86

0

(-1

.70

)

-1

.11

5*

**

(-3

.41

)

EO

-1

.05

2*

(-2

.27

)

-1

.07

7*

(-2

.33

)

-1

.08

1*

(-2

.33

)

-0

.63

2

(-1

.26

)

-1

.89

7

(-1

.84

)

-

0.0

70

**

*

(-3

.44

)

-

0.0

70

**

*

(-3

.44

)

-0

.07

0*

**

(-3

.42

)

-0

.06

2

(-1

.40

)

-0

.07

8*

**

(-4

.32

)

BIG

4-

1.8

33

(-1

.78

)

-1

.88

3

(-1

.81

)

-1

.86

1

(-1

.79

)

-0

.86

1

(-0

.76

)

-1

.43

9

(-1

.37

)

-

0.0

80

**

*

(-2

.93

)

-

0.0

82

**

*

(-2

.99

)

-0

.08

6*

**

(-3

.05

)

-0

.10

0*

*

(-2

.16

)

-0

.06

7*

*

(-2

.13

)

XL

IST

0.5

26

(1.8

3)

0.6

08

*

(2.0

9)

0.6

01

*

(2.0

6)

0.1

82

(0.3

4)

0.6

14

(1.6

4)

0.0

81

(1.8

1)

0.0

85

(1.8

8)

0.0

84

(1.8

7)

0.0

15

(0.1

8)

0.0

88

(1.7

9)


123

the models to control for potential time and industry effects

on the dependent variables. Please refer to the Appendix

for a summary of the variable definitions.

Estimation Method

To test whether and how corporate giving is associated with

financial transparency/corporate misconduct (Hypothesis 1

and 2), and whether the association between them depends

on a firm’s ultimate government ownership (Hypothesis 3),

we used the following models.

Financial Opacitysþ1 ¼ b0 þ b1 GIVINGs þ b2 STATE

þ b3 STATEjGIVINGs þ controlss

þ es

ð1Þ

Corporate Misconductsþ1 ¼ b0 þ b1 GIVINGs

þ b2 STATE

þ b3 STATEjGIVINGs

þ controlss þ es ð2Þ

Financial Opacity½ �½ �#ðt þ 1Þðor Corporate Misconduct½ �½ �Þ#ðt þ 1Þ ¼ b#0þ b#1 GIVING½ �½ �

The ordinary least squares (OLS) method was used to esti-

mate the influence of corporate giving and ownership on

financial opacity and its three dimensions (earnings aggres-

siveness, loss avoidance, and earnings smoothing). In addition,

we estimated corporate misconduct using logistic regression

and OLS for the incidence and level of enforcement, respec-

tively. All of the independent variables were lagged by 1 year.

Results

The descriptive statistics and correlation matrix are pre-

sented in Tables 2 and 3, respectively. Table 2 also shows

whether the mean values of the variables are significantly

different for SOEs and non-SOEs. Except for overall

financial opacity, most of the variables are substantially

different for the two types of firms. In Table 3, the negative

correlation between corporate giving and overall opacity

(OP) and the level of CSRC enforcement (Enforce), toge-

ther with the positive correlation between state (STATE) and

the loss avoidance (LA) and earnings smoothing (ES) mea-

sures, lend preliminary support to our predictions.

Hypotheses 1 and 2 posit that corporate giving has a

positive relationship with financial transparency and a

negative relationship with corporate misconduct. Tables 4

and 5 present the OLS estimation of the effects of corpo-

rate giving and ownership type on financial opacity. InTa

ble

6co

nti

nu

ed

Mo

del

1M

od

el2

Mo

del

3

D_

En

forc

e

Mo

del

4M

od

el5

Mo

del

6M

od

el7

Mo

del

8

En

forc

ele

vel

Mo

del

9M

od

el1

0

ST

AT

E=

0S

TA

TE

=1

ST

AT

E=

0S

TA

TE

=1

MO

1.5

57

**

(2.3

6)

1.1

30

(1.6

4)

1.1

28

(1.6

3)

0.8

39

(1.2

4)

2.2

91

(0.3

7)

0.0

89

(0.8

9)

0.0

80

(0.7

8)

0.0

81

(0.7

9)

0.0

20

(0.2

0)

0.0

36

(0.1

1)

BO

AR

D2

.03

1

(1.1

5)

1.7

99

(1.0

4)

1.7

89

(1.0

3)

2.8

48

(1.0

4)

0.4

20

(0.2

2)

0.2

44

(1.2

6)

0.2

28

(1.1

8)

0.2

37

(1.2

3)

0.5

91

(1.2

2)

0.0

71

(0.4

0)

Co

nst

an

t1

.84

5

(0.7

9)

1.7

51

(0.7

4)

1.6

14

-0

.68

-1

.00

2

(-0

.25

)

2.4

70

(0.8

3)

0.2

16

(0.9

1)

0.2

50

(1.0

5)

0.2

59

(1.0

8)

-0

.10

8

(-0

.18

)

0.4

18

(1.6

1)

Ind

ust

ryd

um

my

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yea

rd

um

my

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

.o

fo

bse

rvat

ion

s5

,46

25

,46

25

,46

21

,71

73

,74

55

,45

55

,45

55

,45

51

,71

53

,74

0

Pse

ud

o/A

dju

sted

R2

0.1

16

0.1

22

0.1

22

0.0

77

0.1

49

0.0

26

0.0

27

0.0

27

0.0

18

0.0

24

No

tet-

stat

isti

csar

ein

par

enth

eses

(tw

o-t

aile

dte

st).

*p\

0.0

5;

**

p\

0.0

1;

**

*p\

0.0

01

C. Qian et al.

123

Model 1 of Table 4, corporate giving has a negative and

significant effect on overall financial opacity (the opposite

of financial transparency) (p \ 0.001). The effect remains

the same even when we include the interaction term

between GIVING and STATE in Models 2 and 3, which

lends strong support to Hypothesis 1. Moreover, using the

three separate dimensions of financial opacity in Table 5,

we also find corporate giving to have a significant and

negative effect on loss avoidance and earnings smoothing,

but not on earnings aggressiveness.

Table 6 presents the results for corporate giving’s influ-

ence on corporate misconduct. Model 1 demonstrates the

results of a firm having been investigated by the CSRC, and

Model 6 is for the result on the level of enforcement fol-

lowing that investigation. Models 1 and 6 suggest that cor-

porate giving does not affect the probability of misconduct,

neither the level of enforcement following the investigation

in general. However, for the level of enforcement, we find a

marginally significant negative association with corporate

giving after controlling for STATE in the model. Therefore,

Hypothesis 2 is supported in general.

Hypotheses 3a and 3b posit that the negative associa-

tions between corporate giving and financial opacity and

corporate misconduct are stronger for non-SOEs. Model 2

of Table 4 shows that the interaction term between the

STATE and GIVING is positive and significant at the

p \ 0.01 level, thus supporting Hypothesis 3a. Further

analysis differentiating between the central and local

governments in Model 3 of Table 4 shows that the coun-

tering effect comes mainly from central government-con-

trolled SOEs. Here, the implication is that SOEs controlled

by the central government are more likely to engage in

corporate giving to fulfill their obligations toward the

government, rather than out of sincere concern for their

stakeholders. Models 4 and 5 in Table 4 present the split

sample analysis based on SOEs versus non-SOEs. The

significantly negative association between corporate giving

and financial opacity in the non-SOE sample (STATE = 0)

suggests that Chinese non-SOEs that voluntarily engage in

corporate philanthropic activities also tend to deal with

their shareholders in an appropriate, ethical manner. We

also separately test the association between corporate giv-

ing and the three financial opacity measures on the SOE

and non-SOE samples (untabulated), and consistently find

that corporate giving is negatively related to loss avoidance

and earnings smoothing only for the non-SOE sample, and

not for SOE firms.

Table 6 shows a positive and significant coefficient for

the interaction term between the state variable and giving

in the level of enforcement test (Model 7), indicating that

SOE giving is not associated with the level of CSRC

enforcement. Further analysis shows that this positive

interaction effect comes mainly from SOEs controlled by

the central government (Model 8). We further partition the

sample into SOEs and non-SOEs, as in Models 4 and 5 in

Table 4. The results given in Models 9 and 10 confirm the

negative and significant relationship between corporate

giving and the level of enforcement for non-SOEs, but

there is no such evidence for SOEs. Overall, the results

lend partial support to Hypothesis 3b.

Robustness Check

We also note the possibility that firms engaged in corporate

philanthropic giving activities may be systematically dif-

ferent from those that are not engaged in such activities. In

other words, it is possible that the some factors that affect

whether or not a firm engages in corporate philanthropy

may also be correlated with our dependent variables—

financial transparency and corporate misconduct. To adjust

for the possibility of sample selection bias, we performed a

two-stage Heckman selection model (Heckman 1979).

Specifically, in the first stage the likelihood of a firm’s

philanthropy was estimated by applying a probit model to

the entire sample of firms. We used firm-level and industry-

level antecedents such as firm size, firm age, leverage,

market-to-book ratio, industry-adjusted ROA, slack

resources, state ownership, and industry and year dummies

to predict the incidence of engaging in corporate philan-

thropic activities and calculated the Inverse Mills ratio. In

the second stage, the relationship between corporate phi-

lanthropy and financial transparency and misconduct was

examined by including the Inverse Mills ratio estimated

from the first stage regression as an additional control. The

results are largely consistent with those presented above.12

Discussion

Corporate philanthropic giving activities have gained

greater acceptance among Chinese stakeholders in recent

years. The primary goal of this study is to examine whether

and how corporate giving in China is related to the quality

of financial information and corporate misconduct. We also

explore whether and how the relationship between corpo-

rate giving and the quality of financial reporting differs

among firms with different types of ownership. Building on

stakeholder theory, we argue that firms that actively engage

in corporate giving should behave responsibly not only

toward their general stakeholders, but also toward their

shareholders. Moreover, we also develop the argument that

although most Chinese firms are actively engaged in cor-

porate giving activities, the relationship between corporate

giving and financial transparency may vary with the

12 The results are available upon request.


123

government ownership of the firm. As Chinese publicly

listed companies are characterized by a relatively large

government stake, the country thus provides us with an

ideal setting in which to test the implications of corporate

philanthropy for two types of firms—SOEs and non-SOEs.

Our findings on the relationship between corporate

philanthropic activities and financial transparency in the

Chinese setting contribute to the scholarly understanding of

these issues in a variety of ways. First, this study contrib-

utes to the existing literature on corporate giving, which

largely examines the relationship between corporate giving

and financial performance (Griffin and Mahon 1997; Lev

et al. 2010; Wang and Qian 2011). Rather than looking at

the performance implications of corporate giving, our study

directly examines the effect of corporate giving on finan-

cial information transparency and corporate misconduct

such as the violation of securities laws. Consistent with our

expectations, we find that corporate philanthropic giving is

associated with a higher level of financial transparency for

non-SOEs than for otherwise comparable SOEs. Further

analysis reveals that these results are driven by the lower

likelihood of loss avoidance and the lower level of earnings

smoothing associated with corporate giving. Moreover, we

also find a significant negative association between cor-

porate giving and the level of CSRC enforcement for non-

SOEs, but not for SOEs. By documenting these findings,

we shed light on how corporate philanthropy extends to

other aspects of corporate behavior, such as the provision

of high-quality financial information. To the best of our

knowledge, this is one of the first studies to examine the

effects of corporate giving on financial information trans-

parency and corporate misconduct.13

Second, our study of corporate philanthropy also con-

tributes to a growing body of research on the role of

government involvement in corporate philanthropic deci-

sions in China (Li and Zhang 2010; Wang and Qian 2011;

Zhang et al. 2010; Luo and Zhang 2009; Fang et al. 2011;

Du et al. 2013). Research shows that government influence

and political connections play a key role in firms’ corporate

giving decisions in China (Fang et al. 2011; Du et al.

2013). Supporting this argument, previous studies show

that corporate philanthropic giving activities in China,

specifically those among SOE firms, to some extent con-

stitute the fulfillment of corporate obligations (Luo and

Zhang 2009). Following the argument that corporate giving

decisions of SOEs and non-SOEs in China may be moti-

vated by different factors, we extend the research in this

area by exploring how a firm’s ownership type affects the

relationship between corporate giving and financial

transparency.

Third, a better understanding of corporate giving’s

implications for a firm’s financial information quality is

important because investors rely on that information to

make efficient capital allocation decisions. We provide

evidence that corporate giving is positively associated with

financial transparency among China’s non-SOEs. In addi-

tion, we find that the level of sanctions (i.e., the severity of

regulation violations) levied by the CSRC after the inves-

tigation of violations is negatively associated with corpo-

rate giving among non-SOEs. The evidence supports the

notion that non-SOE firms that deal honestly with their

stakeholders through corporate philanthropic activities are

also more likely to act responsibly toward their share-

holders by providing high-quality financial information.

Hence, our findings suggest that non-SOEs’ giving deci-

sions are representative of the efforts that non-SOEs devote

to building trust and signal their willingness to deal with all

stakeholders in an ethical way. Our findings are consistent

with those of Atkins (2006) and Chih et al. (2008), who

claim that a socially responsible firm should not only

demonstrate responsibility to its general stakeholders, but

also to its shareholders by providing transparent financial

information.

This study has several limitations that suggest direc-

tions for future research. First, we are aware that corpo-

rate philanthropic giving is a very specific type of

corporate social activity. It is thus possible that the con-

clusions we have drawn are not transferable to other types

of corporate social activity, such as environmental pro-

tection programs or product safety. Future research could

explore the relationship between other social activities

and corporate financial transparency or corporate mis-

conduct. Second, the data on the amount of company

giving used in this study were self-reported by the firms,

and it is thus possible that some of the figures were

manipulated and give rise to validity concerns. A fruitful

direction for future research would be to examine cor-

porate giving using data provided by a third party, such as

the Red Cross. Third, although we did not investigate the

matter, we believe the relationship between the corporate

giving of non-SOEs and financial transparency may also

vary depending on the recipients and/or the firms’ visi-

bility. The literature would definitely benefit from further

investigations of the boundary conditions of this rela-

tionship. Lastly, although we collected longitudinal data

and used a time lag design in the estimation, which

minimizes the effects of the causality issue, we are aware

that we cannot fully rule out reverse causality. Future

research may use better research design such as using

longitudinal data together with survey data to further

examine the research questions of the study.

13 Several prior studies have examined the relationship between

financial reporting quality and CSR performance (Kim et al. 2012);

however, they did not examine corporate philanthropic giving in

particular.

C. Qian et al.

123

Conclusion

Building on the instrumental stakeholder perspective, this

study finds that corporate giving has a negative relationship

with financial information opacity and corporate miscon-

duct. Our findings suggest that firms that care about their

general stakeholders also demonstrate concern for inves-

tors’ interests by delivering more transparent financial

information and avoiding misconduct. Moreover, the rela-

tionship is stronger for non-SOEs in China. We hope that

this study takes us closer to a better understanding on the

relationship between corporate philanthropy (and corporate

social activities in general) and corporate behavior toward

investors (including the provision of transparent informa-

tion and avoidance of misconduct).

Appendix

Variable definitions

Variable Definition

Overall financial

opacity

Average rank of earnings aggressiveness, loss

avoidance, and earnings smoothing

Earnings

aggressiveness

Percentile rank of scaled accruals of a sample

firm in year t. Scaled accruals are defined as

(DCAkt - DCLkt - DCASHkt ? DSTDkt -

DEPkt ? DTPkt)/TAkt-1, where DCA is change

in total current assets, DCL is change in total

current liability, DCASH is change in cash,

DSTD is change in current portion of long-term

debt included in total current liabilities, DEP is

depreciation and amortization expense, DTP is

change in income taxes payable, and TA is total

assets

Loss avoidance Percentile rank of the ratio of the number of years

with small positive earnings minus the number

of years with small negative earnings divided

by their sum. We define firms with small

positive earnings (small negative earnings) as

firms with bottom-line net income scaled by

lagged total assets between 0 and 1 percent

(between 1 and -1 %)

Earnings

smoothing

Percentile ranks of the correlation between the

change in accruals and the change in cash flow,

both scaled by lagged total assets in year t.

D_Enforce A dummy variable which equals to 1 if the

sample firm is investigated by the CSRC in

year t, and 0 otherwise

Enforce Enforcement type of a sample firm that was

penalized by the government in year t

GIVING Percentile rank of donations scaled by assets of a

sample firm in a year

STATE A dummy variable which equals to 1 if the

ultimate controller of the sample firm is the

local government or central government, and 0

otherwise

Variable Definition

LOCAL A dummy variable which equals to 1 if the


local government

CENTRAL A dummy variable which equals to 1 if the


central government

SIZE Firm size, calculated as the natural logarithm of

year-end total assets

LEV Financial leverage, computed as the ratio

between year-end total liabilities and total

assets

TOP1 Year-end shareholding of the largest shareholder

MTB Market value divided by the book value of total

equity at year-end

ADJROA Industry median-adjusted return on total assets of

previous year

EO A dummy variable which equals to 1 if a sample

firm has an equity offering in the subsequent

year, and 0 otherwise

BIG4 A dummy variable which equals to 1 if a firm is

audited by a BIG4 auditor, and 0 otherwise

XLIST A dummy variable which equals to 1 if a firm

issues B-shares or H-shares, and 0 otherwise

MO Stock ownership held by managers

BOARD Percentage of independent directors on the board

References

Agrawal, A., & Knoeber, C. R. (2001). Do some outside directors

play a political role? Journal of Law and Economics, 44,

179–198.

Ahlstrom, D., Bruton, G., & Liu, S. (2000). Navigating China’s

changing economy: Strategies for private firms. Business Hori-

zon, 43(1), 5–15.

Atkins, B. (2006). Is corporate social responsibility responsible?

Corp. Govern. Advert, 14, 28–29.

Balakrishnan, R., Sprinkle, G. B., & Williamson, M. G. (2011).

Contracting benefits of corporate giving: An experimental

investigation. The Accounting Review, 86(6), 1887–1907.

Berman, S. L., Wicks, A. C., Kotha, S., & Johns, T. M. (1999). Does

stakeholder orientation matter? The relationship between stake-

holder management models and firm financial performance.

Academy of Management Journal, 42(5), 488–506.

Bhattacharya, U., Daouk, H., & Welker, M. (2003). The world price

of earnings opacity. The Accounting Review, 78(3), 641–678.

Brammer, S., & Millington, A. (2005). Corporate reputation and

philanthropy: An empirical analysis. Journal of Business Ethics,

61(1), 29–44.

Brown, W. O., Helland, E., & Smith, J. K. (2006). Corporate

philanthropic practices. Journal of Corporate Finance, 12(5),

855–877.

Carroll, A. B. (1999). Corporate social responsibility evolution of a

definitional construct. Business and Society, 38(3), 268–295.

Chen, G., Firth, M., Gaoand, D. N., & Rui, O. M. (2005). Is China’s

securities regulatory agency a toothless tiger? Evidence from

enforcement actions. Journal of Accounting and Public Policy,

24(6), 451–488.


123

Chen, J. C., Patten, D. M., & Roberts, R. W. (2008). Corporate

charitable contribution: A corporate social performance or

legitimacy strategy? Journal of Business Ethics, 82(1), 131–144.

Chih, H., Shen, C., & Kang, F. (2008). Corporate social responsibil-

ity, investor protection, and earnings management: Some

international evidence’. Journal of Business Ethics, 79(1–2),

179–198.

Chiu, S., & Sharfman, M. (2011). Legitimacy, visibility, and the

antecedents of corporate social performance: An investigation of

the instrumental perspective. Journal of Management, 37(6),

1558–1585.

Clarkson, M. E. (1995). A stakeholder framework for analyzing and

evaluating corporate social performance. Academy of Manage-

ment Review, 20(1), 92–117.

Davidson, W. N., & Worrell, D. L. (1988). The impact of

announcements of corporate illegalities on shareholder returns.


Dickson, B. J. (2003). Red capitalists in China: The Party, private

entrepreneurs, and prospects for political change. New York:

Cambridge University Press.

Donaldson, T., & Preston, L. (1995). The stakeholder theory of the

corporation: Concepts, evidence, implications. Academy of

Management Review, 20(1), 65–91.

Faccio, M. (2006). Politically connected enterprises. American

Economic Review, 96(1), 369–386.

Fang, J., Li, W., & Li, Y. (2011). What drives corporate charitable

contributions: market forces, government influences, or political

goodwill? Evidence from China. University of Toronto working

paper.

Farber, D. B. (2005). Restoring trust after fraud: Does corporate

governance matter? The Accounting Review, 80(2), 539–561.

FASB (Financial Accounting Standard Board). (1993). SFAS 116,

Accounting for contributions received and contributions made

(issued 6/93).

Fisman, R. (2001). Estimating the value of political connections.

American Economic Review, 91(4), 1095–1102.

Friedman, M. (1970). The social responsibility of business is to

increase its profits. New York Times Magazine, 13, 32–33, 122,

124, 126.

Galaskiewicz, J. (1997). An urban grants economy revisited: Corpo-

rate charitable contributions in the twin cities, 1979-81, 1987-89.

Administrative Science Quarterly, 42(3), 445–471.

Gao, F., Faff, R., & Navissi, F. (2012). Corporate philanthropy:

Insights from the 2008 Wenchuan earthquake in China. Pacific-

Basin Finance Journal, 20(3), 363–377.

Gelb, D. S., & Strawser, J. A. (2001). Corporate social responsibility

and financial disclosure: An alternative explanation for increased

disclosure. Journal of Business Ethics, 33(1), 1–13.

Godfrey, P. C. (2005). The relationship between corporate philan-

thropy and shareholder wealth: A risk management perspective.

Academy of Management Review, 30(4), 777–798.

Griffin, J. J., & Mahon, J. F. (1997). The corporate social performance

and corporate financial performance debate: Twenty-five years

of incomparable research. Business and Society, 36(1), 5–31.

Haley, U. C. V. (1991). Corporate contributions as managerial masques:

Reframing corporate contributions as strategies to influence society.

Journal of Management Studies, 28(5), 485–509.

Heckman, J. (1979). Sample selection bias as a specification error.

Econometrica, 47(1), 153–161.

Hemingway, C., & Maclagan, P. (2004). Managers’ personal values

as drivers of corporate social responsibility. Journal of Business

Ethics, 50(1), 33–44.

Hillman, A. J., & Keim, G. D. (2001). Shareholder value, stakeholder

management, and social issues: What’s the bottom line?

Strategic Management Journal, 22(2), 125–139.

Jensen, M., & Meckling, W. (1976). Theory of the firm: Managerial

behavior, agency cost and capital structure. Journal of Financial

Economics, 3(4), 305–360.

Du X., Jian, W., Du, Y., Feng W., & Zeng, Q. (2013). Religion, thenature of ultimate owner, and corporate philanthropic giving:

Evidence from China. Journal of Business Ethics. doi:10.1007/

s10551-013-1804-1.

Jones, T. (1995). Instrumental stakeholder theory: A synthesis of

ethics and economics. The Academy of Management Review,

20(2), 404–437.

Khwaja, A., & Mian, A. (2005). Do lenders favor politically

connected enterprises? Rent provision in an emerging financial

market. Quarterly Journal of Economics, 120(4), 1371–1411.

Kim, Y., Park, M., & Wier, B. (2012). Is earnings quality associated

with corporate social responsibility? The Accounting Review,

87(3), 761–796.

Leuz, C., Nanda, D., & Wysocki, P. D. (2003). Investor protection

and earnings management: An international comparison. Journal

of Financial Economics, 69(3), 505–527.

Lev, B., Petrovits, C., & Radhakrishnan, S. (2010). Is doing good

good for you? How corporate charitable contributions enhance

revenue growth. Strategic Management Journal, 31(2), 182–200.

Li, W., & Zhang, R. (2010). Corporate social responsibility,

ownership structure, and political interference: Evidence from

China. Journal of Business Ethics, 96, 631–645.

Lin, L. (2010). Corporate social responsibility in China: Window

dressing or structural change? Berkeley Journal of International

Law, 28(1), 64–100.

Linthicum, C., Reitengaand, A., & Sanchez, J. (2010). Social

responsibility and corporate reputation: The case of the Arthur

Andersen Enron audit failure. Journal of Accounting and Public

Policy, 29(2), 160–176.

Luo, X., & Zhang, J. (2009). Institutional or instrumental: What

affects corporate social responsibility behavior in emerging

economies. Academy of Management, 1, 1–6.

Margolis, J. D., & Walsh, J. P. (2003). Misery loves companies:

Rethinking social initiatives by business? Administrative Science

Quarterly, 48(2), 268–306.

McWilliams, A., & Siegel, D. (2001). Corporate social responsibility:

A theory of the firm perspective. Academy of Management

Review, 26(1), 117–127.

McWilliams, A., Siegel, D., & Wright, P. (2006). Corporate social

responsibility: Strategic implications. Journal of Management

Studies, 43(1), 1–18.

Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997). Toward a theory

of stakeholder identification and salience: Defining the principle

of who and what really counts. Academy of Management Review,

22(4), 853–886.

Navarro, P. (1988). Why do corporations give to charity? Journal of

Business, 61(1), 65–93.

Orlitzky, M., Schmidt, F. L., & Rynes, S. L. (2003). Corporate social

and financial performance: A meta-analysis. Organization Stud-

ies, 24(3), 403–441.

Paine, L. S. (2002). Value shift. New York: McGraw-Hill.

Peng, M. W., & Luo, Y. (2000). Managerial ties and firm performance

in a transition economy: The nature of a micro-macro link.


Petrovits, C. (2006). Corporate-sponsored foundations and earnings

management. Journal of Accounting and Economics, 41(3),

335–362.

Porter, M. E., & Kramer, M. R. (2002). The competitive advantage of

corporate philanthropy. Harvard Business Review, 80(12), 5–16.

Pozner, J. E. (2008). Stigma and settling up: An integrated approach

to the consequences of organizational misconduct for organiza-

tional elites. Journal of Business Ethics, 80(1), 141–150.

C. Qian et al.

123

http://dx.doi.org/10.1007/s10551-013-1804-1

http://dx.doi.org/10.1007/s10551-013-1804-1

Rosen, S., Simon, J., Vincent, J. R., MacLeod, W., Fox, M., & Thea,

D. M. (2003). AIDS is your business. Harvard Business Review,

81(2), 80–87.

Saiia, D. H., Carroll, A. B., & Buchholtz, A. K. (2003). Philanthropy

as strategy when corporate charity ‘‘begins at home’’. Business

and Society, 42(2), 169–201.

Sanchez, C. M. (2000). Motives for corporate philanthropy in El

Salvador: Altruism and political legitimacy. Journal of Business

Ethics, 27(4), 363–375.

Seifert, B., Morris, S. A., & Bartkus, B. R. (2003). Comparing big

givers and small givers: Financial correlates of corporate

philanthropy. Journal of Business Ethics, 45(3), 195–211.

Seifert, B., Morris, S. A., & Bartkus, B. R. (2004). Having, giving and

getting: Slack resources, corporate philanthropy, and firm

financial performance. Business and Society, 43(2), 135–161.

Sharfman, M. (1994). Changing institutional rules: The evolution of

corporate philanthropy, 1983-1953. Business and Society, 33(3),

236–269.

Sharma, S., & Henriques, I. (2005). Stakeholder influences on

sustainability practices in the Canadian foreign products indus-

try. Strategy Management Journal, 26(2), 159–180.

Shleifer, A. (2004). Does competition destroy ethical behavior? The

American Economic Review, 94(2), 414–418.

Su, J., & He, J. (2010). Does giving lead to getting? Evidence from

Chinese private enterprises. Journal of Business Ethics, 93(1),

73–90.

Verschoor, C. (2006). Consumers consider the importance of

corporate social responsibility. Strategic Finance, 88(2), 20–22.

Wang, H., & Qian, C. (2011). Corporate philanthropy and financial

performance of Chinese firms: The roles of social expectations

and political access. Academy of Management Journal, 54(6),

1159–1181.

Wang, H., Choi, J., & Li, J. (2008a). Too little or too much? Untangling

the relationship between corporate philanthropy and firm financial

performance. Organization Science, 19(1), 143–159.

Wang, Q., Wong, T. J., & Xia, L. (2008b). State ownership, the

institutional environment, and auditor choice: Evidence from

China. Journal of Accounting and Economics, 46(1), 112–134.

Wang, L., & Yung, K. (2011). Do state enterprises manage earnings

more than privately owned firms? The case of China. Journal of

Business Finance & Accounting, 38(7), 794–812.

Williams, R. J., & Barrett, J. D. (2000). Corporate philanthropy,

criminal activity, and firm reputation: Is there a link? Journal of

Business Ethics, 26(4), 341–350.

Wokutch, R. E., & Spencer, B. A. (1987). Corporate saints and

sinners: The effects of philanthropic and illegal activity on

organizational performance. California Management Review,

29(2), 62–77.

Xin, K., & Pearce, J. (1996). Guanxi: Connections as substitutes for

formal institutional support. Academy of Management Journal,

39(6), 1641–1658.

Zhang, R., Rezaeeand, Z., & Zhu, J. (2010). Corporate philanthropic

disaster response and ownership type: Evidence from Chinese

firms’ response to the Sichuan earthquake. Journal of Business

Ethics, 91(1), 51–63.


123

Documents

Corporate Philanthropy, Ownership Type, and Financial Transparency