Effects of place-based industrial upgrading reform and corporate philanthropy: Evidence from a natural experiment in China

Abstract

This paper examines the effect of place-based industrial upgrading reform on corporate philanthropy. By introducing the implementation of transformation and upgrading zone policy (the Reform) as an exogenous shock, we show evidence that the Reform promotes corporate philanthropy. The effect is particularly pronounced in firms with non-state ownership, high financing constraints, heavy pollution, and low advertising expenditure. Further, we find that the Reform increases visibility, reputation, and access to resources by promoting charitable giving of local firms. In addition, the Reform can improve the production efficiency of enterprises, but it may also reduce their investment efficiency. Our paper sheds light on the unintended effect of the Reform on corporate philanthropy, corporate reputation, and resource allocation efficiency to present a clear policy to regulators concerned with industrial transformation and upgrading, corporate social responsibility, and corporate resource allocation efficiency.