Geographical influences on the relationship between corporate philanthropy and corporate financial performance

ABSTRACT

Building on stakeholder theory, the paper argues that geographical differences in stakeholders’ reactions to corporate philanthropy lead to differences in the relationship between corporate philanthropy and corporate financial performance across regions. When comparing the United States and China and different regions within China, it is found that the differences in stakeholder perceptions (as reflected by sinful industry) and information availability (as indicated by advertising intensity) across regions significantly moderate the corporate philanthropy–corporate financial performance relationship. The findings show that the value of corporate philanthropy varies by region and that stakeholder perception and information availability are two important mechanisms through which corporate philanthropy influences corporate financial performance.

KEYWORDS:

• corporate philanthropy
• corporate financial performance
• geographical influences
• stakeholder perception
• information availability

JEL:

• L2
• M14

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

ORCID

Jane Lu http://orcid.org/0000-0002-6352-0471

Xueji Liang http://orcid.org/0000-0003-3318-649X

Heli Wang http://orcid.org/0000-0002-5399-5334

Notes

1. Gambling organizations are prohibited in mainland China.

2. Although the number of companies and total observations is larger for the Chinese sample, the average amount of donations is much larger (about eight times) for the US companies, because corporate philanthropy is a relatively new phenomenon in China.

Additional information

Funding

This research was supported financially by research grants awarded by the China Europe International Business School; Fundamental Research Funds for the Central Universities [grant number 17wkpy17]; the Natural Science Foundation of Guangdong Province [grant number 2018A030310342]; and the National Natural Science Foundation of China [grant numbers 71872193 and 71672146].