Research On China’s Corporate Philanthropic Practices:A Perspective Based On Firms Value Creation

Corporate Philanthropy is important,as the donations have been considered as a source to improve the image of business entity in modern era of high competition.This study has an aim to analyze the Corporate Philanthropic practices in China.The study is more comprehensive and looks into all aspects related to corporate giving behavior in China.We used data on annual basis from 2000 to 2014 for 2,969 firms listed at Shanghai and Shenzhen stock exchanges.The objective of this thesis is to present wide ranged tests of different theories and CP practices using Chinese firm’s sampled including variety of industries.We used different set of determinant variables that effect CP practices and classify them into two broad categories,viz.,micro level variables and other are macro level variables.We also analyzed investor behavior and stock market return mainly focusing on response of financial investor to the CP practices and their investing behavior under natural disasters.We addressed the link among corporate philanthropic performance and corporate financial performance to test whether the corporate philanthropy enhances firm’s value or not.Fixed effect model and hierarchal OLS regression has been used to test hypotheses along with Heckman model to counter the effect of selection bias.We found that more profitability does not mean that the cash flows are available,actually good performing firms or profitable firms are also good at cash management.Cash is utilized in effective way by profitable firms,and have fewer extents of slack resources which generate curvilinear relationship of profitability with Corporate Philanthropy.Corporate Philanthropic practices also influenced by overall situation of economy as well as Industry impact.We found that environmental unfriendly industry firms showing more philanthropic behavior as a counterbalance to their negative image due to immense emission of Pollution.We also found that Corporate Philanthropy creates value for a firm under natural disasters.It also enhances the goodwill of firms in the times of humanitarian needs.In addition,the trend of Corporate Philanthropy also got affected due to natural disasters.We observed that Corporate Philanthropy creates impact on corporate financial performance positively by stake holder perspective and negative impact due to agency cost,generating a curvilinear relationship overall.Corporate philanthropy enhances firm’s value till stakeholder theory works and agency cost did not arise.