Directors’ Prior Life Experience and Corporate Donations: Evidence from China

Abstract We use a recent dataset of 16,082 firm-year observations from publicly traded Chinese firms to show that directors who have prior foreign study or work experience make more corporate donations, a result that supports the path dependency theory related to the effect of prior experiences on subsequent behaviors. The relationship between a director’s prior life experiences and corporate charitable contributions is robust across different types of ownership and industry. We show that corporate donations enable firms to have better access to bank loans, reducing their financial constraints. In addition, these directors appear to consume fewer perquisites, implying lower agency cost with corporate donations.