| BACKGROUNDOur country is a country which natural disasters often occur. In recent years, natural disasters inspired enterprises to engage in philanthropy. Enterprises have become the subject of charitable donations. With strong support and guidance of the party and the state, our philanthropy has been booming. Eighteen government work report also pointed out that we should improve the social welfare system, and support the development of charity, good special care and placement work. As globalization accelerates, the role of traditional production factors for the competitiveness of enterprises increasingly weakened, and human resources, technology, corporate social responsibility have become a new way for the new development. Charitable donations, as an important way of corporate social responsibility, draw more and more people’s attentions. Theoretically, charitable donations can allow enterprises to establish a positive image, and pass full of kindness and responsibility values to business community to gain stakeholders’ support and goodwill, to optimize the competitive environment. However, according to the traditional financial management objectives, maximizing corporate value is to maximize shareholders’ value. Charitable donations occupy corporate resources, reducing the chances of available cash resources and investment in other projects in violation of maximizing shareholders’value, and go against the interests of shareholders. Charitable donations can really improve financial performance or not. Whether there is a difference between different nature of corporate on charitable donations to performance. Therefore, studying the influence of charitable donations on financial performance has an important theoretical and practical significance.PURPOSEThe main purpose of this paper is to analysis the theoretical basis of charitable donations, to excavate mechanism of charitable donations on financial performance. It uses an empirical way to explore the effect of charitable donations on financial performance. As motivations and factors of different corporate nature is different, we do an empirical research on whether there is a difference between different nature of the enterprises’ donations impact on financial performance.1. Through analyzing related theories on charitable donations, this passage is exploring charitable giving against the interests of shareholders or in line with corporate stakeholders’ maximum, achieving economic and social goals at the same time. Then it explores the mechanism how charitable donations affect financial performance. Through this study, we hope charitable donations can receive shareholders’ support. Companies should disclosure charitable donations timely and clearly in order to make the public have an understanding of charitable donations.2. Through studying the differences between different nature of companies’ charitable donations affecting financial performance, it reveals motivations of private enterprises’ charitable donations more complex. To protect private property, private enterprises establish or reinforce political relations through charitable donations, getting necessary resources and building a favorable business environment, formatting relatively competitive advantages. It also provide a feasible way for some companies which have a tensions relationship with customers or the society.MAIN CONTENT AND VIEWThis paper consists of five chapters, the major content of each chapter as following:The first chapter is introduction. Firstly, this chapter introduces the research background and puts forward a question:whether corporate donations have an impact on the financial performance. Then, it briefly describes the theoretical and practical significance of this study, followed by a technology roadmap approach to clearly show the context of this paper. At last, it presents research methods and the expected contributions as well as the deficiencies of this article.The second chapter is literature review. Based on related concepts defined, this chapter reviews the previous existing documents related to this research. There are four main perspectives on the relationship between corporate donations and financial performance, positive correlation, negative correlation, no correlation and nonlinear correlation. And, a majority of researches consider that donations have a positive impact on financial performance. As to the study of the impact of the different nature of corporate donations on financial performance, generally believed, the donations of state-owned enterprises is to help others, on the other hand, the donations of state-owned enterprises are intervened by government or under pressure. The donations of private enterprises are driven by the market, with more initiative and enthusiasm. On the one hand, private enterprises can establish or strengthen political relations through donations, to protect rights of private property and to deal with adverse external environment and policy, on the other hand, private enterprises donations are a way of fulfilling their social responsibility, which can gain better access to public recognition, having advertising effect and establishing a good image and reputation. Accordingly, it can increase sales and promote the company’s financial performance.The third chapter is theoretical analysis. In this section, we first introduce the theoretical basis and mechanism of corporate donations on financial performance. Corporate giving has gone through three different stages and affected by different theories. Donations not only be affected awareness of social responsibility of the companies. Based on shareholder supremacy theory, corporate donations are detrimental to the interests of maximizing shareholder. According to citizen theory, companies are citizens of the society. As citizens, companies should fulfill their social responsibility. In the line with stakeholder theory, companies are common constraints restricted by a variety of related stakeholders. Enterprises are not only affected by the interests of the dominant stakeholders, but also by implicit stakeholders. Enterprise value maximization is to maximize all these interests of stakeholders. Donations can receive the support of implicit stakeholders, improving financial performance indirectly. Based on the theory of strategic charitable donations, companies not only are economical, but also are social. Social and economic goals of a company are mutually compatible. Donations can bring benefits to the society, on the other hand, donations can also enhance the company’s financial performance to achieve economic benefits. Based on resource dependence theory, the business is not an isolated entity, and it need to communicate with the external environment and get an access to favorable resources from external environment. Companies also need to make contributions to the external environment.Next, this chapter also analyzes how corporate donations improve financial performance, including donations with advertising effectiveness, gaining an access to favorable resources and policies, reducing uncertainty and costs on the operation of business. Finally, this chapter analyzes the differences between the state-owned enterprises and private enterprises on the effect of donations on the financial performance. According to the resource dependency theory, the government controls a variety of resources which the company need to exist and develop. The inherently weak political relations of private enterprises make it disadvantaged. So it has an incentive to establish or strengthen political relations through donations, to against adverse conditions. Therefore, donations of private enterprises will exhibit a more positive and proactive attitude. State-owned enterprises, undertaking other important duties, are more administrative instructions or forced by outside pressure. Thus, the donation of state-owned enterprises to promote financial performance is not obvious of private enterprises.The fourth chapter is empirical analysis. First, based on the analysis of the third chapter, the former two hypothesis are proposed in this paper:(1) defining the other conditions, the current corporate donations affect its financial performance in the next period, the greater the intensity of donations, the better of its financial performance;(2) in limited other conditions, as opposed to state-owned enterprises, private enterprises donation to enhance financial performance is more significant. By analyzing private enterprises of the political association have advantages in the access to resources than private enterprise without political association, private enterprises maintain political association through charitable donations to improve financial performance. Pursuant to Section3of this article made assumptions:(3) in limited other conditions, relative to private enterprises with no political association, financial performance of private enterprises with political association is better.Secondly, this chapter also describes the sources of sample selection and data, then set variables and model in this paper. In this paper, there are two models, one is used to verify the impact of the intensity of donation on financial performance of the enterprise, and the second model is used to verify the nature of the impact of actual control of the company’s on financial performance. For the third assumption, we test it by classifying the sample.Finally, this paper inspects and analyzes the empirical results. Based on descriptive statistical analysis and correlation analysis, this study carries out multivariate regression and analyzes the results of the regression. In order to make the result more reliable, this study conducts a robustness test.The fifth chapter is conclusions and recommendations. This chapter make conclusion based on empirical studies. Combined with results, the paper comes up with advices on the donation of the company, donation system and macroeconomic policy formulation. Finally, the paper looks ahead some future research directions.CONTRIBUTIONS(1) The timeliness of the sample.’WenChuan’ earthquake raise the awareness of enterprises’ fulfilling their social responsibilities by charitable donations. This article selects samples which have charitable donations in2008-2011. Because this paper studies ongoing donation activities of enterprises, it can avoid the effect of charitable donations in catastrophic events. At the same time,2008is the first year of China’s charity, and studying the data of charitable donations in2008or later is more instructive for charitable donations practice.(2) The novelty of insights. Many studies have been based on emergencies (such as Wenchuan or Yushu earthquakes) or single a year, the significance of which may be bias. This article is based on the period of four years with a large sample size, thus, the study of charitable donations impact on financial performance is more stable.(3) Based on existing researches, considering politically connected private companies will have advantages in getting the resources or government’s preferential policies than no political association, then they will show better financial performance. |
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