A Research On The Impact Of Economic Policy Uncertainty On Corporate Philanthropy

In recent years,as the rise of worldwide trade protectionism and unilateralism,the friction among countries intensified,economy suffered serious shock,and economic uncertainty grew.In 2020,under the impact of the Sino-American trade friction and the outbreak of COVID-19,China’s economic policy uncertainty index hit an all-time peak,far more than the average international uncertainty index.For enterprises,economic policy uncertainty not only means higher decision-making cost and risk,but also impedes their profitability,growth ability,debt paying ability,and increases the risk of bankruptcy.Therefore,how to mitigate the negative impact of internal and external risks and positively deal with the uncertainty of economic policy has become one of the important parts of corporate management strategy.Since economic policy uncertainty impedes economic growth,enterprises are more likely to hold pessimistic expectation,thus they will act more positively to mitigate the outside risk.Among all the measures,the charitable donations are favored by enterprise managers.As a way to shoulder corporate social responsibility,charitable donations can help enterprises to establish a good fame,promote product sales and create lots of intangible assets,such as reputation capital trust,consumer loyalty,good comments from investors and third party and attraction to potential partners.Besides,charitable donations can work as a form of political contributions to establish good relationship with the local government,so as to help enterprises gain political resources,such as government subsidies and preferential tax policy.Therefore,whether enterprises use charitable donations to relieve risks when faced with economic policy uncertainty is the main topic discussed in this paper.This paper uses the A-share listed companies in Shanghai and Shenzhen as a sample from 2006 to 2019.Through empirical results of the relationship between economic policy uncertainty and corporate philanthropy,it was found that economic policy uncertainty has a positive impact on corporate philanthropy.That is,the higher economic policy uncertainty is,the more companies will donate.In the analysis of heterogeneity,this article finds that there are differences in the influence of economic policy uncertainty on the corporate philanthropy among different priority,level of marketization,political connection,industries,and ownership concentration companies.In comparison,economic policy uncertainty plays a more obvious role in companies with higher level of marketization,political connection,lower ownership concentration,and companies directly connected to consumers.Further,after investigating the effect of corporate philanthropy,this paper examines the follow-up government subsidies and performance of companies.It was found that corporate philanthropy can help companies gain more government subsidies,but has no obvious effect on corporates’ performance.In the robustness test section,this paper tests the robustness of the research conclusion in seven aspects: replacing the economic policy uncertainty and corporate philanthropy indicators,including missing variables,instrumental variable method,changing the main regression model to OLS model,supplementing full sample and excluding specific years.The results still remain robust under different occasions.At the end of this paper,this paper gives advice from the perspective of policy makers,corporate managers and consumers.This article discusses the impact of the normalized corporate philanthropy from the perspective of economic policy uncertainty,and further enriches the theoretical research related to the economic policy uncertainty and corporate social responsibility.Besides,based on the four classical hypotheses of the purposes of corporate philanthropy,this paper conducts comparative analysis.In addition,this paper discusses the effect of charitable donations on companies’ performance.This paper offers new explanation to corporate philanthropy from the perspective of economic policy uncertainty,which is helpful for consumers to view corporate philanthropy in a scientific and objective way.