| Since 2007,when China had a national statistics on social donations,corporate philanthropy has accounted for about 60% of total social donations,becoming the backbone of public welfare and charity.As a kind of free cash payment behavior,corporate philanthropy constitutes the additional cost of businesses operation,which seems contrary to the basic economic responsibility of firms.Existing research mainly form two contradictory theories and empirical conclusions: the “efficiency view” of promoting firm value through charitable donation and the “agency view” of reducing firm value by agents seeking personal benefits.However,the research based on“efficiency view” neglects the deviation and barrier effect of benefit transmission caused by principal-agent conflicts in charitable donation,and the research based on “agency view” directly attributes agency conflicts to the first kind of agency conflict between shareholders and managers or a general study without distinction,which ignores the complexity of donation decision-making process and heterogeneity of corporate philanthropy under the double principal-agent conflicts,as well as the diversity of economic consequences that may occur under this condition.In view of this,combining China's special economic system and capital market situation,this paper constructs a theoretical framework of double principal-agent conflicts applicable to the analysis of charitable donation of listed firms in China based on principal-agent theory,information asymmetry theory and decision-making irrationality theory.On this foundation,this paper explores the mechanism of the first kind of agency conflict between shareholders and managers and the second kind of agency conflict between large shareholders and small shareholders on corporate philanthropy,and analyses the dual roles of large shareholders in the two kind of agency conflicts,as well as the possible supervisory effect and tunneling effect of large shareholders.Then,this paper empirically tests the impact of double principal-agent conflicts on corporate philanthropy,and expands the economic consequences of corporate philanthropy from the perspective of double principal-agent conflicts from two aspects: earnings management and corporate innovation,which are important business practices that can affect firm value.Firstly,this paper empirically tests the mechanism of corporate philanthropy from the perspective of double principal-agent conflicts.This paper divides corporate charitable donation into rational and irrational charitable donation based on the analysis of the contradiction between the “efficiency view” and “agency view”,and empirically examines the impact of rational charitable donation and irrational charitable donation on firm value respectively to verify the rationality of rational and irrational charitable donation measurement and the existence of irrational charitable donation.This paper also empirically examines the impact of double principal-agent conflicts on irrational charitable donation.The results show that rational charitable donation can promote firm value and support the “efficiency view”,while irrational charitable donation can reduce firm value and support the “agency view”.This paper also finds that corporate governance can restrain irrational charitable donation to some extent.Further research shows that large shareholders can influence irrational charitable donation by acting on two kinds of agency conflicts,tunneling effect exists when the proportion held by the largest shareholder is low,and supervisory effect exists when the proportion held by the largest shareholder is high.Compared with non-state-owned enterprises,irrational charitable donation of state-owned enterprises is more serious,and one of the ways for executives of state-owned enterprises to seek private benefits through irrational charitable donation is political resources such as political connection and political promotion.Further research based on corporate foundations reveals that agency conflicts of firms with corporate foundations is more serious comparing with firms without corporate foundations.Overall,the decomposition of charitable donation and the definition and test of rational and irrational charitable donation make the theoretical differences and empirical contradictions between the “efficiency view” and “agency view” highly coordinated,which can not only help firms to correctly understand the dual nature of charitable donation,but also provide new ideas and directions for dealing with agency conflicts in charitable donation.Secondly,this paper empirically tests the impact of corporate philanthropy on earnings management from the perspective of double principal-agent conflicts.This paper respectively examines the impact of rational charitable donation and irrational charitable donation on earnings management based on the dual nature of “efficiency” and “agency”.This paper also empirically examines the impact of double principal-agent conflicts on the relationship between irrational charitable donation and earnings management.The results show that rational charitable donation can not trigger real earnings management,but also can restrain accrued earnings management to some extent.While irrational charitable donation can trigger the “collusion” between accrued earnings management and real earnings management,that is,on the one hand,adjusting accounting earnings through accrued earnings management,on the other hand,and increasing cash flow through real earnings management.This paper also finds that corporate governance can restrain accrued earnings management triggered by irrational charitable donation to a certain extent,but it has no significant impact on the relationship between irrational charitable donations and real earnings management.Further research shows that state-owned enterprises prefer to use real earnings management with strong concealment to cover up irrational charitable donation and adjust accounting earnings,and marketization can reduce accrued earnings management triggered by irrational charitable donation.Further research based on corporate foundations reveals that accrued earnings management of firms with corporate foundations is significantly higher than that of firms without corporate foundations.Overall,this study verifies the logical consistency of the “efficiency view” and “agency view” to some extent,which not only expands the research on the diversity of economic consequences of corporate philanthropy,but also provides a new idea to resolve the dispute between corporate philanthropy and earnings management.Finally,the paper empirically tests the impact of corporate philanthropy on corporate innovation from the perspective of double principal-agent conflicts.This paper respectively examines the impact of rational charitable donation and irrational charitable donation on corporate innovation based on the dual nature of “efficiency” and “agency”.This paper also empirically examines the impact of double principal-agent conflicts on the relationship between irrational charitable donation and corporate innovation.The results show that rational charitable donation has a significant “promoting effect” on innovation investment and innovation performance,while irrational charitable donation has a significant “crowding-out effect” on innovation investment,but a significant “promoting effect” on innovation performance.This paper also finds that corporate governance can reduce the “crowding-out effect” of irrational charitable donation on innovation investment to a certain extent.This paper further considers the impact of property rights,and finds that the “crowding-out effect” of irrational charitable donation on innovation investment exists in both non-state-owned enterprises and state-owned enterprises,while the “promoting effect” of irrational charitable donation on innovation performance only exists in state-owned enterprises.Further analysis shows that external innovative resources such as political connection and school-enterprise connection are the main factors of the “promoting effect” of irrational charitable donation on innovation performance.Further research based on corporate foundations reveals that whether firms establish corporate foundations or not has no significant impact on the relationship between irrational charitable donation and corporate innovation.Overall,this study not only expands the diversity of economic consequences of corporate philanthropy,but also provides a new way to solve the disputes between corporate philanthropy and corporate innovation,and provides a theoretical basis for balancing internal resource allocation in firms. |
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