Agency costs and corporate philanthropic disaster response: the moderating role of women on two-tier boards – evidence from People's Republic of China

Abstract

Prior research evidence shows that strategic and managerial utility motivation explains corporate philanthropic contribution efficiently in western countries. An important question arises, however, regarding whether the corporate philanthropic contribution model is equally appropriate for all types of corporate social responsibility (CSR) (e.g. donation) in all business settings (e.g. Chinese listed firms' philanthropic responses to disaster). In this paper, we consider the unique two-tier board structure of Chinese listed firms and argue that firms with women on the board of directors (BOD) and the supervisory board (SB) are able to challenge this model. Data collected from Chinese listed firms' philanthropic responses to disaster extended the finding that the agency theory with moderators explains corporate philanthropic disaster response much better in the Chinese context. Specifically, the relationship between agency costs and corporate philanthropy (e.g. the likelihood of donation and extent of corporate contributions) weakens in listed firms with a higher vs. lower number of women on the SB. However, women on BODs do not have a similar effect. This constructive replication provides the first examination of the moderating role of women on BODs and SBs on corporate philanthropic behavior. In addition, the findings have important managerial implications for how to enact CSR.

Keywords:

• agency costs
• board of directors
• corporate philanthropy
• supervisory board

Acknowledgements

This study was funded by grants from National Natural Science Foundation of China (No. 71002049; No. 70902066), and New Teacher Fund of Chinese Ministry of Education (No. 20106102120055; No. 20090201120038). We also thank the Social Science Promotion Program in Northwestern Polytechnical University and New teacher support program, as well as President Fund in Xi'an Jiaotong University.