Do Politically Connected Firms Engage More or Less in Corporate Philanthropy? Evidence from Public and Private Firms in China

Abstract

This paper examines whether politically connected firms engage more or less in corporate philanthropy than politically unconnected firms. We argue that political connections have countervailing effects on corporate philanthropy and that the study of publically traded firms (“public firms”) versus private unlisted firms (“private firms”) provides an opportunity to distinguish these effects. Using a unique dataset that encompasses both public and private firms in China, we find that political connections decrease corporate philanthropy among private firms but increase corporate philanthropy among public firms. The magnitude of these effects is also contingent on the size and age of a firm. The findings expand our understanding of corporate philanthropy. The novel approach of leveraging the distinctions between public and private firms creates a new perspective for advancing strategic management theories.