Do Politically Connected Firms Engage More or Less in Corporate Philanthropy?

Abstract

This paper examines the understudied question of whether politically connected firms engage more or less in corporate philanthropy than unconnected firms. We argue that, political connections have countervailing effects on corporate philanthropy, and studying publically traded firms versus private, unlisted firms provides an opportunity to distinguish these effects. Using a unique dataset encompassing both publically traded and private, unlisted firms in China, we find that political connections decrease corporate philanthropy among private, unlisted firms, but they increase corporate philanthropy among publically traded firms. The magnitudes of these effects are also contingent on firm size and firm age. The findings deepen our understanding of the nature of corporate philanthropy, and the novel approach of leveraging the distinctions between publically traded firms and private, unlisted firms opens up a new perspective to advance strategic management theories.