Empirical Research On Charitable Donation, Financing Constraints And Refinancing Of Listed Company In China

After the 2008 "Wenchuan earthquake" occurred, many companies generously donated for earthquake reconstruction. China’s philanthropy has a great development in recent years. As the main force of philanthropy, Company’s charitable donation is not only a return to the social but also benefitting company’s long-term development. Previous literature on philanthropy also indicates that charitable donation has positive effect on the company’s financial performance, market performance and shareholder wealth. Financign constraints is a critical factor restricting enterprise growth and development, but there is little study in current literatures researching philanthropy from the aspect of financing constraints, so studying philanthropy’s effect on alleviating the company’s financing constraints has important practical significance.In order to verify the charitable donations’influence on easing financing constraints and promoting refinancing, we use China’s listed companies from 2006 to 2012 to do empirical test through software stata 10.0, also combining the descriptive statistical methods, binary logistic regression and multivariate linear regression model. The empirical tests of this paper contain three sections. First, we use binary logistic regression model to build financing constraints index, as a comprehensive reflection of the company’s financial constraints. Secondly, to test the effect of donation to alleviate financing constraints, we use financing constraints index as the dependent variable, donation dummy variable as independent variable for whole sample, donation scale as independent variable for charitable giving samples, and introduce company’s asset size, asset-liability ratio and ROE as control variables. Considering that the charitable donation data is disclosed in the annual reports of listed companies at year end, and its role lags, so we use the previous period donation data. And for fear of that the three controlling variables are associated with the current financing constraints index, we also use previous period data. Finally, the empirical of charitable donations promoting refinancing also contain two models:First, we distinguish refinancing samples and un-refinancing samples, and use binary logistic model to examine whether the company who give charity donations have high probability to finance; Then, for the refinancing company samples which have donations last year, we use the financing scale as dependent variable, studying the influence of charitable donations on expanding the scale of refinancing.The empirical results show that the companies who have charitable donations will be faced with lower financing constraints, and donations are helpful to ease the financing constraints. At the same time, the effect will be influenced by ownership nature, equity structure and level of governance of the company. And the further empirical testing of charity and refinancing indicates that charitable companies have more chance of refinancing than un-charitable companies, and charitable donation is helpful to promote the refinancing scale.