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The Role of Corporate Donations in Chinese Political Markets

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Abstract

Many corporations actively engage in political activities to enhance their relationships with politicians, facilitating access to scarce resources and creating competitive advantages. We investigate corporate donations to explore how they initiate interactions between firms and new local leaders in China. Specifically, we propose that political turnover creates unique opportunities for firms to win over new officials via corporate donations, especially in competitive markets. Moreover, we find that firms that make generous donations at the beginning of a new city secretary’s tenure receive more attention from representatives of new local leaders, especially firms that were politically disadvantaged under a predecessor’s governance. Empirical studies on the turnover of city secretaries between 2001 and 2012 in China strongly support our hypotheses. Consequently, this study improves our understanding of how corporate donations initiate social exchanges between firms and politicians.

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Notes

  1. Available at: http://www.kellogg.northwestern.edu/faculty/petersen/htm/papers/se/cluster2.ado.

  2. This method provides the Driscoll and Kraay standard errors, which are also robust to heteroskedasticity across different firm clusters, autocorrelation across different years, and cross-sectional dependence across different firms (Hoechle 2007).

  3. The GEE approach is appropriate for longitudinal data and allows scholars to specify the distribution of the dependent variables while controlling for the estimated bias of standard errors, such as autocorrection and heteroskedasticity, in the dataset (Bednar 2012). Moreover, the GEE is an extension of the generalized linear model (GLM). GLM is based on the maximum likelihood theory for independent observations (Cui 2007), whereas the GEE method is based on the quasi-likelihood theory, and no assumption is made about the dependent observations.

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Acknowledgements

This study was funded by grants from National Natural Science Foundation of China (No. 71672139; No. 71372065; No. 71272002), Shaanxi Province Overseas Students (Grant No. 18920004), and Humanities and Social Science Talent Plan of Shaanxi University. The authors also express their appreciation to the editors and three anonymous reviewers for their suggestions and comments. However, the authors are responsible for all errors in the paper.

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  1. School of Management, Northwestern Polytechnical University, No. 127 Youyi West Road, Xi’an, 710072, Shaanxi, China

    Ming Jia

  2. School of Management, Xi’an Jiaotong University, No. 28 Xianning East Road, Xi’an, 710049, Shaanxi, China

    Zhe Zhang

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  1. Ming Jia
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  2. Zhe Zhang
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Correspondence to Ming Jia.

Appendix

Appendix

See Tables 7 and 8.

Table 7 Variable definitions
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Table 8 The Heckman first-stage regression
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Jia, M., Zhang, Z. The Role of Corporate Donations in Chinese Political Markets. J Bus Ethics 153, 519–545 (2018). https://doi.org/10.1007/s10551-016-3378-1

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