Research On The Relationship Between Corporate Charitable Donations And Corporate Value

With the development of social civilization, the requirements for enterprise are not only focused on the development of profit, the public would like to inspect an enterprise from economy, legislation, CRS and so on. As one of the method of CRS, Charitable donation attracts close attention of the government, customers. The media and charitable organizations regularly publish information on corporate donations. Enterprises also need to publish information about CSR through their own channels. The enterprises who appear in major corporate charitable donations standings frequently give a good impression to the public. Some scholars think that this behavior can help companies improving customer loyalty and income. Those companies who have negative performance of will therefore be adversely affected. Does it can help the enterprise improving enterprise value?The basic theories could explain the relation between the enterprise charitable donation and enterprise value. As social citizen, enterprises should undertake their social responsibility, like economic responsibility, legal responsibility, moral responsibility and the charitable giving behavior. With in-depth theoretical discussion of CSR, more and more perspectives and researches have been focused on charitable giving.The support of the stakeholders is very indispensable for the growth of enterprise. Except the shareholders, the stakeholders also include creditors, customers, government and so on. Besides meet the expectations of investors, corporations are also required to consider the willing of communities, consumers, governments and so on. The products’ quality is an important factor of their main concern, at the same time, they are also concerned that the enterprise is whether enthusiastic about public welfare or not.Resource dependence theory suggests that the survival and development of enterprises require resource. The enterprise can’t be self-sufficient, because its own resource is limited. In other words, companies need access to resources from the surroundings. Inevitably, Enterprise resources depend on other social subjects. Enterprises have to follow a series of contracts with stakeholders. Enterprise have the right to use or own resources in return. Participate in charitable donations also belongs to a part of the implicit contract, it will appeal to attention of consumers and trust of government.It is necessary for enterprise to take part in charitable donation and realize economic growth. It also requires enterprise to adhere this behavior in the long-term. Companies began to giving charitable donations and other social responsibility into business strategy. Strategic charitable donations are no longer occasional behavior of enterprises. They participate in community projects combined with its development plans. Under the premise of not increasing business pressures, enterprises need to choose right amount and respond to incentives of government departments. At the same time, they could decrease donation cost by reasonable tax provision. Otherwise, Strategic charitable donations can improve social awareness and win the support of consumers and other stakeholders. Enterprises adopt a strategic charitable want to achieve a win-win in business and society.The enterprise life cycle theory also describes the way how to divide the lifecycle. Initial studies focused on the description of the characteristics about the corporate life cycle. These studies describe the situation of enterprises from the financial and operational aspects, and roughly distinguish the development of enterprises imitating biological growth pattern. The enterprise life cycle includes initial stage, growth stage, maturity stage, recession stage, elimination stage. Further research will focus on the division of the life cycle about corporate, including classification method such as the establishment of the time, mathematical equations and cash flow. The significant difference from the growth pattern of the biosphere is that the development of enterprises isn’t limited by time. In addition to death, transformation could be come true.The literature review includes the concept of CRS, charitable donation, enterprise value and research results about enterprise charitable donation. It points out that the charitable behavior is independent, voluntary and not mandatory. It also describes the process of development of corporate social responsibility research. Because of the special economic circumstance, Domestic study started later than oversea study. Studies include the division of social responsibility. Levels of CRS rise up from the economic, legal, ethics to philanthropic.As a profitable organization, the motivation which encourages enterprises to participate in charitable donations can help us to explore whether a company can benefit from charitable donations. Existing research shows that there are three possible motives in the charitable donations:(1) Altruistic motive, companies and their executives do well on morality.(2) Egoistic motives, companies hope to improve its fame, increase sales and reach the goal of strategic charitable donation.(3) Forced motivation, although the companies take part in charity actively, they just want to narrow the gap with other companies.Researches on the relationship between charitable donations and corporate enterprise value are based on the second type of motivation. They hope to find out the association between enterprise value and charitable donation, and provide companies with proposal. There isn’t a consistent conclusion on the relationship of enterprise charitable donation and enterprise value. Existing conclusions include positive relevant, negative relevant and not relevant, the majority of research conclusion are positive relevant. In the further study, some scholars found that enterprise life cycle would impact the relationship of enterprise charitable donation and enterprise value. Because there are differences in their own operations, economic strength, which will affect the ability of enterprises to participate in charitable donations. If charitable donations exceed the carrying capacity of the enterprise, they can’t reach win-win situation, companies may get in trouble, in other words, it is impossible for corporate to improve its value.The next part is empirical study. The sample of this thesis A-share listed companies which participate in charitable donations activities from2009-2011. We select Tobin’s Q to measure the correlation between the enterprise s value and charitable donations. Because of the sample data is panel data, we chose the appropriate regression model though Hausman test. As Strategic Philanthropy said, the effect of corporate donations will be affected by their own. Therefore, this thesis chooses the life cycle as the moderator. If we add the corporate life cycle in our research the effect of corporate charitable donations is consistent or not. There is an obvious positive relationship in the stage of start-up, growth, maturity. It gets not significant negative in the stage of recession. It is not relevant in the period of elimination. Not all corporate donations would have the same impact on the enterprise value.At first, this paper confirms it that the business life cycle could affect the relationship between enterprises charitable donations and the enterprise value, via theoretical and empirical analysis. In the period of start-up, good corporate fame can attract new customers, enhance consumer loyalty and help companies capturing market. Good relations between government and enterprises can reduce unnecessary barriers which affect enterprises carry out business. Charitable donations could help start-up enterprises to build up relationships and improve the reputation. In the period of maturity, the pace of business development gets slower, it is necessary for enterprises to consolidate the market and maintain customer well. Enterprises are also able to participate in charity actively. In the period of growth, the influence of charitable donations has reduced. The situation of enterprises can’t be improved by participating in charitable donations when they are in degenerating stage. There is a not relevant relation in the stage of elimination. It means that charitable donations will not affect the value. Companies need to adjust the main business areas so as to enter a new period of growth.There are results and proposals in the fifth part. After summarizing the empirical results we sort out the data and dig out the relationship between them. On the basis of data results, this paper proposes strategic charitable giving programs, including the donation amount, donation field, partners and reasonable tax avoidance. We put forward charitable policy, charities inspect and other recommendations to the Government. Limitations proposed for the lack of articles in this paper which I hope to make improvements in future studies.The economic environment is different from the West, the researches on enterprise charitable donation start later than the west. Many research results also remain in the theoretical level, or measure the impact of corporate charitable donations on corporate finance from the perspective of stakeholders. The researches on enterprise life cycle are mainly concentrated in the division and introduction of the life cycle. The first innovation of this paper is that it introduce the corporate life cycle as the moderator. We want to investigate the enterprise life cycle whether influence the relations between enterprise value and enterprise charitable donation. We analyze the relation from the perspective of different periods, instead of a whole research. It is easy for enterprises to adjust charitable donations strategies by combining their different businesses situation, and make a right decision. The second innovation of this paper is that its research sample. In order to reduce errors caused by accidental donation, sample chooses the enterprises who have participated in corporate donations for three consecutive years. Continuing charitable donation charitable donations can reflect the impact on corporate value steadily.