| With the continuous development of economic society, instead of merely providing qualified commodities at the initial stage, the public requirement for firms has shifted to take more social responsibilities. In the meantime, firms also begin to realize the importance and necessity of corporate social responsibility (CSR), which is especially true for listed companies which are expected to shoulder more social responsibility since they are the leader of the nation's development. Philanthropic donations, the most important means of taking social responsibility, are being increasingly focused by theoretical and practical world. Since China is one of the four ancient civilizations, Chinese people are deeply influenced by Confucianism which advocates the moral of taking pleasure in helping people and this tradition is inherited for thousands of years. As the reform and opening up and modernization cause develop continuously, a tremendous number of excellent firms arise in China. They not only make great contribution to the emancipation of productive force and the modernization, but also shoulder a series of social responsibilities such as social employment. Meanwhile, philanthropic donation course has achieved distinctive development. For example, statistics from Community Times and The China Philanthropy List for many years have shown that with the repaid development of Chinese business, firms, private enterprises in particular, are gradually becoming the important promoter to the philanthropic causes.The rise of firms' engagement in philanthropic activities stimulates the scholars to investigate its motivation and economic consequence, which brings out a quantity of significant literature. Nevertheless, previous studies have at least following deficiencies:First of all, they mainly focus on the influencing factors and motivation of donations. What's more, they directly link corporate donations with firm performance and firm value but fail to explore the specific mechanism and path how donations influence firm performance and firm value in depth. Third, they don't take special institutional background in China into consideration. Because of the Chinese institutional background at the transition stage and deeply-rooted influence of Confucianism, social capital has especially vital function and significance in the course of operation for a corporation. As a result, donations in China not only affect firm value in a specific path, but are also deeply influenced by the special institutional background. Therefore, based on social capital theory and stakeholder theory and others, this article uses the sample of the donation data of Chinese listed companies from2007to2012to explore the motivation and influencing factors of corporate donations respectively. Furthermore, under the background of the nature of property rights and the process of marketization, we empirically study the specific mechanism of how corporate donations affect firm value based on the channels of financing convenience effect and policy resource obtaining effect. Lastly, under the condition of different nature of property rights and marketization process as well as their combination, we examine how corporate donations affect firm value.Results suggest that:To begin with, from the perspective of managerial traits, if the chairman of the board is older and better educated, his/her willingness to donate is greater and the size of donations is bigger. As to corporate characteristics, corporate with bigger size, better growth prospect and less fierce competition condition has greater willingness of donation and the size of donations is bigger. In addition, compared with firms who don't donate, those who make donations gain more bank debt, which is a representation of financial convenience effect, and as for SOEs and districts with higher degree of marketization, the financing convenience effect of donations is weaker. Third, compared with firms which don't donate, those who make donations have a greater possibility to obtain government compensation and enter monopolized and regulated industry, which is a representation of policy resource obtaining effect, and as for SOEs and districts with higher degree of marketization, the policy resources obtaining effect is weaker. Fourth, donated firms have better performance, which is represented as the value effect of corporate donations, and this effect is weaker in SOEs and districts with higher degree of marketization. The results above show that donations are essential ways for firms to build up social capital and more importantly, they are also important methods to make a connection with the government, which can achieve the firm value effect by the financing convenience effect and policy resources obtaining effect. Moreover, the firm value effect of donations is weaker in districts with higher degree of marketization where formal institution is better developed and in SOEs which have natural connections with government.The major significances of this study lie in:First, it helps to better understand the specific channel of how donations affect firm value, and hence deepens the research in economic consequences of corporate donations. As to the effect of donations on firm performance and firm value, many scholars have already made deep exploration. Although current studies bridge them through intermediary function of social capital, they don't reveal the channel though which this special social capital transmit to firm value. This article uses the bond of the financing convenience effect and policy resources obtaining effect to build up the specific channel in which corporate donations influence firm value.Second, it helps to understand how the social capital built up by donations work affect firm value, and therefore prove the effect of informal institutions on China's economic development. Claessens and Fan (2002) and Bian and Qiu (2000) et al suggested that social relationship plays a essential role in obtaining scarce resources for Chinese firms, and the ability to obtain scarce resources is the key to success. Our study examines whether the social capital built up by donations has financing convenience and policy obtaining effect, therefore, it helps to reveal that the informal institution of donations adds more value to firms and also provide evidence of understanding how informal institution contribute to the rapid development in China.Third, under the condition of underdeveloped formal institutions such as finance and prevailing financing constraints, this article suggests that firms, private firms in particular, may use donations to build up social capital in order to obtain more scarce resources, thereafter fuel the development of Chinese firms and even the takeoff of overall macro economy. At present, since finance institutions in China are severely underdeveloped, private firms find it difficult to gain bank debt under the condition of credit discrimination, which blocks the development of private firms and even the private economy to a large extent. This article suggests that building up social capital by donations increases not only government compensation and but also the possibility of entering monopolized and regulated industries, which is represented as financing convenience effect and policy resource obtaining effect. Accordingly, the results of our research provide firms, private firms in particular, with theoretical and practical guidance of how to expand outer financing channel under the condition of institutional and financing constraints and make further possible policy suggestions about the development of firm private sector and overall economic increase.The innovative contribution mainly lies in:First, from the perspective of social capital of bank-enterprises relationship, we empirically examine the financing convenience effect of corporate donations based on the nature of property rights and the process of marketization, and thus further broaden and deepen the motivation and effect of corporate donations. With the rapid development of Chinese economy, Chinese firms have grown from the stage of expansion to that of shouldering more social responsibility. Philanthropic donations have become the most important means of taking social responsibility. Thus, firms' motivation of donations increasingly arouses the attention of scholars. In the bank-oriented Chinese finance systems, bank debt is the major source of financing as well as the crux of successful operation for average firms. Therefore, whether donations help firms get more bank debt may be an essential measurement when making donations. For the above reasons, this article analyzes the financing convenience effect of corporate donations and the intermediary role of the nature of propriety rights and the process of marketization under the background of the emerging and transition reality in China. We find that corporate donations lead to more bank debt, which means that it has the financing convenience effect and this effect is weaker in SOEs and districts with higher degree of marketization. The empirical results further broaden and deepen the motivation and effect of corporate donations from the angle of government-enterprise relationship, and thus provide empirical evidence for the fact that donations help build up bank-enterprise relationship.Second, from the perspective of social capital of government-enterprises relationship, we empirically examine the policy resources obtaining effect of corporate donations based on the nature of property rights and the process of marketization, and thus further broaden and deepen the motivation and effect of corporate donations from the perspective of government-enterprises relationship. A lot of studies have revealed that for China at the transition stage, the build-up of government-enterprise relationship helps firms; private firms in particular, obtain critical policy resources, which play a decisive role in the success. In addition, corporate donations not only improve its image and reputation, but also take some responsibility for the promotion of social stability and harmony, and contribute to the government maintenance of stability and improve corporate-enterprise relationship. For the above reasons, this article analyzes the policy resources obtaining effect of corporate donations and the intermediary role of the nature of propriety rights and the process of marketization under the background of the emerging and transition reality in China. We find that corporate donations help firms get more government compensation and have an easier entry to monopolized and regulated industries, which means that corporate donations have the policy resources obtaining effect and this effect is weaker in SOEs and higher degree of marketization districts. The empirical results further broaden and deepen the motivation and effect of corporate donations from the angle of government-enterprise relationship, thus provide empirical evidence for the fact that donations help build up government-enterprise relationship.Third, based on financing convenience effect and policy resources obtaining effect of donations, we link them with firm value and reveal the innate mechanism of how corporate donations affect firm financial performance and firm value. Current studies abound in investigating the relationship between corporate donation and financial performance and even firm value, but they either directly bridge them or using the intermediary factor of social capital. Obviously, studies above fail to present how the social capital built up by donation affect firm value. Therefore, based on the two dimensions of bank-enterprise relationship and government-relationship, this article respectively examines that corporate donations have financing convenience and policy resources obtaining effect. In this way, we link corporate donations with firm financial performance (or firm value) and consequently revealed the specific channel and mechanism of the effect of corporate donation on firm financial performance and firm value. |
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