A Concealed Wrongdoing of Corporate Philanthropy: Evidence from China

The paper is trying to examine the changes between rational and irrational charitable donation of Chinese listed corporations under the background that an increasing number of Chinese listed corporations register charity foundations in recent years. Considering corporate income tax ratio as a proxy for tax preference, whether products are exposed to consumers directly or indirectly, as well as gross profit margin, debt financing scale and debt maturity structure as proxies for the reputation effect and strategic advantage, the indicators of rational charitable donation consist of the five factors mentioned above; The indicator of irrational charitable donation is disposal accrued profits calculated by Extended Jones Model. By the regression of data of charitable donations from Chinese A listed corporations during the year from 2008 to 2013, findings show that the behavior of rational charitable donation is weakened gradually, while, in contrast, the irrational charitable donation is strengthened. The listed corporations have strong motivation to transfer profits through registering and establishing charity foundations, which is a new tendency of transferring interests.