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Journal of Business Ethics

Erschienen in:

07.04.2015

Corporate Philanthropy and Stock Price Crash Risk: Evidence from China

verfasst von: Min Zhang, Lu Xie, Haoran Xu

Erschienen in: Journal of Business Ethics | Ausgabe 3/2016

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Abstract

How to mitigate stock price crash risk has become a focus in the theoretical and practical fields. Building on the work of Kim et al. (J Bank Finance, 43:1–13, 2014b), this paper investigates the relation between corporate philanthropy and crash risk under the unique Chinese institutional background. The results show that both state ownership and the 2005 split share reform attenuate the mitigating effect of corporate philanthropy on crash risk. Specifically, the negative relation between corporate philanthropy and crash risk is less pronounced for state-owned enterprises than for non-state-owned enterprises, and it is also less pronounced after firms accomplish the split share reform. Further, this effect is more pronounced for firms with greater financial risks and poorer performance. Our paper contributes to the growing literature on the determinants of stock price crash risk and the economic consequences of corporate philanthropy. It also offers useful guidance to firms that are seeking to reduce stock price crash risk in emerging markets.

Vorheriger Artikel Corporate Environmental Responsibility and Firm Risk

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Prior studies (Hutton et al. 2009; Kim et al. 2011a, b) also measure crash risk with an indicator variable that equals 1 when a firm experiences one or more extreme events of negative stock returns (i.e., firm-specific weekly returns fall 3.2 standard deviations below the yearly mean value) in a year. DeFond et al. (2015) mention that the indicator proxy roughly measures stock price crash risk because it calculates the left tail risk independently of the right tail risk and thus does not capture the asymmetry in the return distribution in the 2011 version of their working paper. Thus, we do not use this measure in our analyses.

All of the data employed in monetary measurements to construct variables are measured in RMB.

Because we exclude observations with missing or ambiguous data on state ownership, the number of observations in Table 6 is smaller than that in Table 5. Similarly, the number of observations in Table 7 decreases due to missing information about when firms accomplish the split share reform.

We also introduce the traditional Z-Score _t (Altman 1968) and emerging market Z-Score _t (Altman 2005) into our model, and the results are quite similar.

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Titel: Corporate Philanthropy and Stock Price Crash Risk: Evidence from China
verfasst von: Min Zhang
Lu Xie
Haoran Xu
Publikationsdatum: 07.04.2015
Verlag: Springer Netherlands
Erschienen in: Journal of Business Ethics / Ausgabe 3/2016
Print ISSN: 0167-4544
Elektronische ISSN: 1573-0697
DOI: https://doi.org/10.1007/s10551-015-2647-8

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