Philanthropy by State-Owned Enterprises in China: Executive Promotion and the "Grabbing Hand"

Corporate philanthropy is on the rise in China, but thus far our understanding of this phenomenon is limited. We develop an agency-based view to understand the complex role of state owned enterprises (SOEs) in corporate philanthropy in China. We propose that some SOE chairmen are incentivized to engage in corporate philanthropy in the hope that it will enhance their promotion opportunities within the state apparatus. Examining the corporate philanthropy decisions of 1,450 Chinese listed firms in response to the 2008 Sichuan earthquake, we find that 1) SOEs with “promotable” chairmen were much more likely to make donations than other SOEs; 2) chairmen of donating SOEs were subsequently more likely to be promoted, and less likely to be demoted, than chairmen of non-donating SOEs; and 3) investors responded particularly negatively to donations by promotable SOE chairmen. Thus, corporate philanthropy by SOEs in China is in part a "grabbing hand," associated with chairmen’s self-aggrandizing behavior and the e...