Can Charitable Donations Of Listed Companies Reduce The Cost Of Debt?

In recent years,people's concern about the company is no longer limited to the company's operating conditions and operating profits.According to the corporate charitable donation strategy concept,the active participation of companies in charitable donations can be regarded as a business strategy of the companies and can bring other social resources to the company.Based on this,this paper studies the relationship between donations and the cost of debt.According to Li Sihai(2016),from the availability of debt financing of companies,the cost of debt can be divided into interest-bearing debt cost and non-interest-bearing debt cost to discuss.Based on the analysis of Shanghai and Shenzhen A-share listed companies from 2011 to 2017,this paper discusses the relationship between China's charitable donation activities and the cost of debt by using theoretical analysis and empirical research methods on the basis of domestic and foreign literature reviews.The results found that:(1)The charitable donation activities of listed companies will not only help companies to obtain more trade credit,but also can effectively reduce the cost of debt for companies.(2)Donations can affect the scale of trade credit and the cost of debt of companies by increasing media attention.Media attention can serve as a medium for signal transmission,which can help companies that donate to the outside world to alleviate information asymmetry between companies and suppliers.(3)This paper further analyzes whether the process of reducing the cost of debt of the company will be affected by other factors.This paper explores whether a company has political connections and the product market competition in which the company is located will have a significant impact on the signaling effect of charitable donations.Empirical results have found that,in terms of the cost of debt,compared with the signaling effect of charitable donations,corporate donations with political connections tend to strengthen the internal connection between the companies and the banks.In terms of trade credit,the impact between charitable donation activities and trade credit is more obvious in companies that do not have political connections.Under this circumstance,corporate charitable donation activities can be expressed as a signal transmission effect.Companies with low competition in the product market can get more trade credit and lower the cost of debt by donating compared to companies in the highly competitive product market.This is because companies with fierce competition in the product market have higher risk of default and risk of being acquired.Suppliers and banks have a higher risk assessment of the company than the good news assessments of donations.The results show that the donation of companies has a signal transmission effect,which can reduce the cost of debt,but it will be affected by the special nature of the company and the risk of the degree of competition in the product market.The research in this paper is helpful for the company's managers to better understand the impact of charitable donation behavior on the cost of debt,encourage large companies to actively fulfill social responsibility,achieve a win-win situation between the company and the society,and provide ideas for obtaining loans for SMEs with difficulty in financing.The combination of corporate strategy and corporate charitable donation activities can promote companies to actively participate in charitable donation activities and contribute to the stable development of society.