Signaling through corporate philanthropy

Wuqing Wu; Fei Peng; Yuan George Shan; Xiaoxiao Jie

doi:10.1016/j.pacfin.2020.101389

Signaling through corporate philanthropy

Wuqing Wu, Fei Peng, Yuan George Shan, Xiaoxiao Jie

Accounting and Finance

Research output: Contribution to journal › Article › peer-review

12 Citations (Scopus)

Abstract

We deconstruct corporate philanthropy donations (CPDs) into expected CPD and excess CPD and examine their impact on firms' future market performance. We also examine various moderating effects, including political connection and market development. Using a data set comprising 13,939 firm-year observations for firms with A-shares listed on the Shenzhen and Shanghai Stock
Exchanges between 2003 and 2014, the study offers three key findings. First, consistent with the signaling hypothesis, we find a positive association between excess CPD and market returns; however, expected CPD is not related to market returns. Second, the interaction of expected CPD and state-owned enterprises is negatively related to firms' future market reactions. This is because
investors perceive these enterprises' CPD activities as forced apportionment. Third, market reactions improve if firms are located in less developed regions and contribute excess CPD.

Original language	English
Article number	101389
Journal	Pacific-Basin Finance Journal
Volume	62
DOIs	https://doi.org/10.1016/j.pacfin.2020.101389
Publication status	Published - Sept 2020

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title = "Signaling through corporate philanthropy",

abstract = "We deconstruct corporate philanthropy donations (CPDs) into expected CPD and excess CPD and examine their impact on firms' future market performance. We also examine various moderating effects, including political connection and market development. Using a data set comprising 13,939 firm-year observations for firms with A-shares listed on the Shenzhen and Shanghai StockExchanges between 2003 and 2014, the study offers three key findings. First, consistent with the signaling hypothesis, we find a positive association between excess CPD and market returns; however, expected CPD is not related to market returns. Second, the interaction of expected CPD and state-owned enterprises is negatively related to firms' future market reactions. This is becauseinvestors perceive these enterprises' CPD activities as forced apportionment. Third, market reactions improve if firms are located in less developed regions and contribute excess CPD.",

author = "Wuqing Wu and Fei Peng and Shan, {Yuan George} and Xiaoxiao Jie",

year = "2020",

month = sep,

doi = "10.1016/j.pacfin.2020.101389",

language = "English",

volume = "62",

journal = "Pacific-Basin Finance Journal",

issn = "0927-538X",

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T1 - Signaling through corporate philanthropy

AU - Wu, Wuqing

AU - Peng, Fei

AU - Shan, Yuan George

AU - Jie, Xiaoxiao

PY - 2020/9

Y1 - 2020/9

N2 - We deconstruct corporate philanthropy donations (CPDs) into expected CPD and excess CPD and examine their impact on firms' future market performance. We also examine various moderating effects, including political connection and market development. Using a data set comprising 13,939 firm-year observations for firms with A-shares listed on the Shenzhen and Shanghai StockExchanges between 2003 and 2014, the study offers three key findings. First, consistent with the signaling hypothesis, we find a positive association between excess CPD and market returns; however, expected CPD is not related to market returns. Second, the interaction of expected CPD and state-owned enterprises is negatively related to firms' future market reactions. This is becauseinvestors perceive these enterprises' CPD activities as forced apportionment. Third, market reactions improve if firms are located in less developed regions and contribute excess CPD.

AB - We deconstruct corporate philanthropy donations (CPDs) into expected CPD and excess CPD and examine their impact on firms' future market performance. We also examine various moderating effects, including political connection and market development. Using a data set comprising 13,939 firm-year observations for firms with A-shares listed on the Shenzhen and Shanghai StockExchanges between 2003 and 2014, the study offers three key findings. First, consistent with the signaling hypothesis, we find a positive association between excess CPD and market returns; however, expected CPD is not related to market returns. Second, the interaction of expected CPD and state-owned enterprises is negatively related to firms' future market reactions. This is becauseinvestors perceive these enterprises' CPD activities as forced apportionment. Third, market reactions improve if firms are located in less developed regions and contribute excess CPD.

U2 - 10.1016/j.pacfin.2020.101389

DO - 10.1016/j.pacfin.2020.101389

M3 - Article

SN - 0927-538X

VL - 62

JO - Pacific-Basin Finance Journal

JF - Pacific-Basin Finance Journal

M1 - 101389

ER -

Signaling through corporate philanthropy

Abstract

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