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Research On The Impact Of Corporate Philanthropy Behavior On The Cost Of Capital

Posted on:2018-07-09Degree:MasterType:Thesis
Country:ChinaCandidate:X YeFull Text:PDF
GTID:2347330536972366Subject:Accounting
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With the development of economy,the corporate social responsibility has become the focus of public attention,and as the highest form of social responsibility—corporate philanthropy behavior also attracts tremendous attention.China is currently in a critical period of deepening reform and opening up,accelerating the transformation of economic development mode,the development of philanthropy is of great significance for building a harmonious society.2015 has become a key node in the further legalization,specialization and internationalization of China's philanthropy.On October 30,2015,China has promulgated the law of the People's Republic of China charity law(draft)in order to promote charity culture and standardize the development of charity.At the same time,China's first special law of charity has been passed unanimously by the 4th session of 12 th NPC.At the same time,the three national standards of social responsibility's formal implementation which is a milestone regularizes relevant concepts and practice of social responsibility and promotes the healthy and orderly development of China's social responsibility.In recent years,the listed companies are actively engaged in charities.Does the company carry out charitable donations to meet the requirements of laws and regulations or follow its heart? Many scholars study the financial performance of charitable giving in order to explore the motivation of charitable giving,but they don't reach a unanimous conclusion.Therefore,we need to find a new perspective to further understand the company's charitable giving behavior.In the process of the development of the company,the financing problem is a growing problem that cannot be ignored.With the enhancement of corporate social responsibility consciousness,connecting charitable donation with financing has become an increasingly important issue.Charity donations can reduce the degree of information asymmetry,improve the participation of stakeholders in the company,and reduce agency costs.Meanwhile,the behavior can reduce the company's non-system risk,thereby reducing the cost of capital.So it is necessary to examine the relationship between corporate philanthropy and the cost of capital and it can provide a new explanation for the company's charitable donation.Using the data of charity donations from 2007 to 2015,the paper discusses the relationship between corporate philanthropy and the cost of capital.The empirical study finds that: Firstly,there is a significant negative correlation between corporate philanthropy and the cost of capital.The more corporate donations,the cost of debt capital,equity capital cost and weighted average cost of capital are lower.At the same time,we divide the sample into the consumer sensitive industries and non-consumer sensitive industries and find that corporate charitable donations play an important role in adjusting the capital cost in the consumer sensitive industries.It indicates that the consumer consumption concept of social responsibility has been formed.Customers pay for the company's charitable donations through their own consumption so as to encourage more companies to donate something.Secondly,compared with the state-owned enterprises,non-state-owned enterprises are easier to reduce the cost of capital,including the cost of debt capital,the equity capital cost and weighted average cost of capital through charitable donations.Thirdly,in the areas of poor institutional environment,the problem of information asymmetry is more serious and the information about charitable donation is more valuable for investors.So in the poor system environment for the areas,charitable donations play a more significant role on the reduction of cost of debt capital,equity capital cost and weighted average cost of capital.And this paper puts forward the following four suggestions.Firstly,listed companies especially which are in consumer sensitive industries,should enhance the consciousness of charitable donations,increase investments in charities and improve the management system of charity donations and information transmission system in order to reduce the cost of capital and enhance the value of the company;Secondly,non-state-owned enterprises should carry out the development strategy which contains charitable donations to achieve a win-win situation;Thirdly,changing the government-led “relational” mode of corporate donation,eliminating the phenomenon of government's fundraising or public apportion and improving the non-state-owned enterprises' moral consciousness so that can mobilize the enthusiasm of the charities.Fourthly,shifting the transformation of government functions and ensuring the leading role of the market-oriented economy supplemented by administrative intervention.Meanwhile,the government can take appropriate industrial policies to guide capital flow to the backward areas in order to realize the rational allocation of resources and reduce regional disparities.This paper mainly includes the following three aspects of contributions and innovation: Firstly,the highest form of charitable donation behavior,known as corporate social responsibility,can refine the analysis of charitable donation's impact on the cost of capital,and make comprehensive consideration of its relationship with the cost of debt capital cost,equity capital cost and weighted average cost of capital.Secondly,by studying the role of charitable donations to investors from the perspective of financing can provide a new perspective of research.Thirdly,in view of China's special economic transition background,studying the relationship between charitable giving and the cost of capital from the aspect of property rights and the system environment,which can provide new evidence for the role of local government in the bank credit policy,as well as the relevant departments under the differences between non-state-owned enterprises and state-owned enterprises well so that they can formulate policies which are consistent with the actual situation in china.
Keywords/Search Tags:Charitable giving, the cost of debt capital, the cost of equity capital, the weighted average cost of capital
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