Philanthropy, political connection and debt finance: Reciprocal behavior of governments and private enterprises
Abstract
Purpose
Philanthropy is taken as a strategic behavior by private enterprises to obtain financial resources from governments. This paper aims to examine the relationship between private enterprise philanthropy and the debt finance, further investigating the way by which governments exchange resources with private enterprises.
Design/methodology/approach
The paper opted for an empirical study using a sample of 1,489 Chinese private-listed companies from 2007 to 2010. The study analyzed the relationship between philanthropy and debt finance based on the resource dependence theory and social exchange theory and tested the moderating effect of political connection.
Findings
Philanthropy can help private enterprises to get the debt finance, and this effect occurs mainly among the political connected private enterprises; the higher degree of credit allocation marketization is, the less philanthropy can affect the debt finance and the less influence political connection can exert on that relationship. Philanthropy contributes to debt financing mainly because it can help obtain more long-term loan, and this effect is more obvious for politically connected private enterprises in regulated industries.
Originality/value
This paper verifies the action logic of private enterprises philanthropy from the perspective of exchange behavior, which is helpful to understand the motive and influence of private enterprises philanthropy.
Keywords
Acknowledgements
Disclaimer: Originally published in Chinese in Nankai Business Review, Li and Wang, “Philanthropy, Political Connection and Debt Finance – Reciprocal Behavior of Governments and Private Enterprises” NBR, 2015, Vol. 18 No. 1, pp. 4-14.
Citation
Li, W. and Wang, P. (2016), "Philanthropy, political connection and debt finance: Reciprocal behavior of governments and private enterprises", Nankai Business Review International, Vol. 7 No. 4, pp. 451-473. https://doi.org/10.1108/NBRI-04-2016-0013
Publisher
:Emerald Group Publishing Limited
Copyright © 2016, Emerald Group Publishing Limited