Generosity from The Poor：An Explanation Based on The Signaling Theory
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| Title | Generosity from The Poor：An Explanation Based on The Signaling Theory
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| Author | Li Sihai,Chen Xuan and Song Xianzhong |
| Organization | Accounting School; Zhongnan University of Economics and Law; School of Management,Xiamen University; School of Management; Jinan University |
| Email | lshhhy0420@163.com |
| Key Words | Firm Performance; Signaling Theory; Charitable Donations; Stakeholders |
| Abstract | Choosing the private A-share list companies with declining performance in China as a study sample, we empirically investigate the signaling effect of charitable donations based on the signaling theory. We find a positive relationship between charitable donations and performance in the private companies. But in the sample of companies with declining performance, our finding is different. In order to signal positive message to stakeholders, the donations from these companies are not becoming smaller when they are earning less. Therefore the confidence of stakeholders can be kept, resources could be provided as usual, and the role that accounting information played in debt contract become less important. However, we find positive signals could not bring companies new resources, and there is a boundary of donation signaling. Loss-making companies are not within the boundary, which shows that donation signaling having an interval effect. Our findings, especially the interval effect of signaling, add to the growing literature of both corporate social responsibility and signaling theory and are important to the decision makers of companies. |
| Serial Number | WP817 |
| Time | 2015-02-06 |
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