Conflicting Stakeholder Pressures and the Decoupling of Corporate Philanthropy Practices

Abstract

Although research on corporate philanthropy practices increasingly recognizes the influence of stakeholder pressures, it pays little attention to conflicting stakeholder pressures. Drawing on stakeholder theory, we develop a framework in which firms use philanthropy to respond to the conflicting demands that arise from the government and investors. We argue that firms experiencing heightened government pressure are more likely to adopt philanthropy and implement it in a substantive manner. However, doing so creates tension and conflict with investor expectations of prioritizing current earnings. Given such conflicting pressures, firms exhibit a decoupling response that combines a high-likelihood of philanthropy with low-substance implementation. We find empirical support for our arguments using a sample of 8,940 Chinese listed firms from 2006 to 2015. Our study contributes to the literature on corporate philanthropy, stakeholder theory, and decoupling.