Corporate Philanthropy and Corporate Misconduct : Evidence from China

This paper examines the association between corporate philanthropy and corporate misconduct. Using panel data from China, we find a negative relationship between philanthropic engagement and the likelihood of subsequent corporate misconduct. In addition, we find that the favorable effect of philanthropy on corporate misconduct is stronger when a company’s philanthropic giving is more sustained, when a company is located in a region with a stronger external institutional environment, and when a company is not a state-owned enterprise. Our results suggest that companies engaging in philanthropy have incentives to enhance their reputations and build their relationships with stakeholders. Our research extends the extant literature on corporate misconduct by identifying a new antecedent relating to corporate philanthropy and provides valuable insights for practitioners in terms of how to assess and predict the link between corporate philanthropy and the likelihood of its subsequent misconduct