Does firm's philanthropy lead to more missions: theory and evidence
China Agricultural Economic Review
ISSN: 1756-137X
Article publication date: 2 September 2021
Issue publication date: 17 January 2022
Abstract
Purpose
Inspired by the comparison of charity donations among candidates in rural elections, the authors linked the non-profit motives of charity to corporate pollution emissions. And on this basis, the authors aim to provide theoretical and empirical explanations for the relationship between corporate philanthropy and pollution. The authors find that the desire to pursue more pollution emissions stimulates the firm's philanthropy, which is similar to the public welfare donations in rural elections.
Design/methodology/approach
Firstly, the authors construct a game-theoretical framework consisting of an entrepreneur and a bureaucrat to study the environmental cost of corporate philanthropy through the impact on pollution emission by the firm. Secondly, the authors used various empirical methods, including hybrid OLS, IV-2SLS, PSM, etc., to empirically test the impact of a firm's philanthropy on corporate pollution emissions. Finally, the authors use the output and abatement input as intermediary variables and apply the intermediary effect model to test the impact mechanism between corporate philanthropy and corporate pollution emissions.
Findings
Theoretical model finds that the firm invests more in philanthropy discharges more emissions when the theoretical model is in political equilibrium. Besides, empirical results show that corporate philanthropy will lead to more pollution emissions by reducing abatement input and increasing production. Finally, the heterogeneity test finds that compared with state-owned enterprises, the intention of non-state-owned enterprises' philanthropy for more pollution emission is more obvious. Moreover, the improvement of regional environmental regulation can significantly inhibit the realization of corporate philanthropy's poor motive.
Practical implications
The results have obvious policy implications for China's future policy-making. Firstly, regulatory agencies should pay close attention to the charitable behaviors of firms with serious negative environmental externalities, and prevent them from replacing more pollution emissions with philanthropy. Besides, due to weak environmental supervision in rural areas, rural polluting enterprises will be more inclined to make charitable donations to the village collective to obtain more emission rights. Therefore, the government should strengthen environmental supervision in rural areas to prevent enterprises from wanton pollution.
Originality/value
By constructing a game-theoretical framework consisting of an entrepreneur and a bureaucrat, the authors expound on corporate philanthropy's pollution motivation and decision-making mechanism for the first time in theory. Besides, this paper finds that the desire to pursue more pollution emissions also stimulates the firm's philanthropy. This paper expands the literature on corporate charitable donation motivations.
Keywords
Acknowledgements
Both authors contributed significantly in the project. Dr. He conceived and designed the whole project, and acquired all the funding supports. Zhang calculated the results under Dr. He’s supervision. He and Zhang analyzed the data, and co-wrote the manuscript. The authors declare that there are no conflict of interest involved.
Funding: This project is jointly supported by the Nationa Major Project of the National Social Science Foundation of China (Grant No. 20ZDA109), the State Key Project of the National Social Science Foundation of China (Grant No. 19AZD003), and the Guangdong Province Higher Vocational Colleges \& Schools Pearl River Scholar Funded Scheme (2019).
Citation
He, L.-Y. and Zhang, H. (2022), "Does firm's philanthropy lead to more missions: theory and evidence", China Agricultural Economic Review, Vol. 14 No. 1, pp. 122-141. https://doi.org/10.1108/CAER-11-2020-0280
Publisher
:Emerald Publishing Limited
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