Paving the way for children: family firm succession and corporate philanthropy in China

Wen He, Xin Yu

Research output: Contribution to journalArticleResearchpeer-review

Abstract

We investigate whether internal succession in family firms motivates founders to engage in corporate philanthropy. We argue that founders who intend to pass control of the firm to their children are likely to prepare for the internal succession by building up family assets such as reputation and political connections through corporate philanthropy. Supporting our argument, we find that both the likelihood and the amount of philanthropic donations increase when listed family firms in China are in the internal succession process. The effect of successions on philanthropic donations is stronger for family firms that have political connections or are located in areas with stronger government influence in the local economy. The effect concentrates on family firms when heirs are young and inexperienced. When heirs are established, family firms actually make fewer philanthropic donations. Our results remain robust after addressing endogeneity issues.

Original languageEnglish
Pages (from-to)1237-1262
Number of pages26
JournalJournal of Business Finance and Accounting
Volume46
Issue number9-10
DOIs
Publication statusPublished - Oct 2019
Externally publishedYes

Keywords

  • corporate philanthropy
  • donation
  • family firms
  • G39
  • M14
  • succession

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