Charitable Donations And Corporate Fraud

According to the charity donation report of China in 2017,the total amount of social donations in 2017 reached 149.986 billion yuan,of which corporate donations accounted for 64.23%.The phenomenon that corporations are more and more keen on charitable donation has gradually attracted extensive attention from academia.Most of the existing studies focus on the positive motivation and its economic consequences of corporate charitable donations.They find charitable donations can not only bring the advertising effects to the corporations,but also transmit the information that the products are in high quality?corporations are in good financial status and confidence in future performance to the stakeholders.In addition,charitable donations can help companies to establish and maintain good relationship with government,and thus companies can obtain economic benefits such as government subsidies?preferential tax measures?credit resources?investment opportunities and technological resources.However,companies which are generous in donations often do something that are not responsible for our societies,which has forced us to think more deeply.The same as corporate charitable donations,corporate frauds are very hot.Although China's securities market supervision system is constantly improving,in the context of political intervention?weak penalty enforcement?poor regulatory efficiency,corporate fraud events emerge one after another.In connection with the fact that charitable donations can bring the companies positive resources and the hypocrisy in CSR phenomenon,we may come up with a question that weather corporate donations are associated with corporate fraud.Specifically,can charitable donations help companies decrease the probability of fraud detection? Are more donations associated with the higher likelihood of corporate fraud?In order to explore the above questions,using a sample of listed companies in A-share capital market in China from 2008 to 2017 and data about corporate charitable donations and corporate fraud events detected by China Securities Regulatory Commission?Shanghai Stock Exchange and Shenzhen Stock Exchange,this thesis attempt to combine rent seeking theory?resource dependence theory?social exchange theory and information asymmetry theory and use a Bivariate Probit model with partial observability to explore the relationship between corporate charitable donations and corporate frauds,and give the theoretical connections and empirical evidences between charitable donations and corporate frauds.The conclusions of this thesis show that more charitable donations decrease the probability of fraud detection and are positive associated with the higher likelihood of corporate frauds.Furthermore,charitable donations and corporate frauds have a more positive correlation in regions with weaker legal environment;compared with state-owned enterprises,the above correlations are more obvious in non-state-owned enterprises.In addition,this thesis does some exploring work,after distinguishing the types of corporate fraud,it finds that the relationship between charitable donations and corporate business frauds are more significant than the company's information disclosure frauds;after dividing the samples into two parts on the basis of 18 th National Congress,it finds that the above relationship between charitable donations and corporate frauds is more significant before the 18 th National Congress.My thesis on the one hand expands the research on charitable donations and hypocrisy in CSR phenomenon.On the other hand,this thesis discusses the possible reasons for such connection from the perspective of rent-seeking theory? adverse selection and moral hazard,so it enriches the research on corporate social responsibility rent-seeking?adverse selection and moral hazard issues in charitable donations.It is helpful for us to take a more comprehensive view of corporate charitable donations,and to better understand the deviation between corporate social responsibility image and corporate behavior in reality.