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Journal of Business Ethics

, Volume 154, Issue 3, pp 643–666 | Cite as

Business Groups and Tunneling: Evidence from Corporate Charitable Contributions by Korean Companies

  • Byungki Kim
  • Jinhan PaeEmail author
  • Choong-Yuel Yoo
Original Paper

Abstract

This paper investigates whether corporate philanthropic decisions are associated with a firm’s listing status and business group affiliation. Analyzing a large sample of public and private firms in Korea, we find that (1) public firms make more charitable contributions than private firms and (2) business group-affiliated firms make more charitable contributions than non-affiliated firms. The results suggest that public firms, owing to greater public scrutiny, and business groups, owing to higher political costs, are encouraged to make more corporate charitable contributions. Further, we find that (3) greater corporate giving by public firms than private firms is more pronounced for business group-affiliated firms, compared with non-affiliated firms. The result is consistent with business groups’ strategic coordination of their affiliates’ philanthropic decisions to tunnel business group resources out to controlling shareholders who hold a larger portion of private affiliates than public affiliates.

Keywords

Listing status Business group Corporate giving Tunneling Public scrutiny 

Notes

Acknowledgements

We thank Steven Dellaportas (Accounting Section Editor), two anonymous referees, Dominic H. Chai, Yong Jin Hyun, Jun-Koo Kang, Woojin Kim, Hyun-Han Shin, Chae-Yeol Yang, and the seminar participants at 2016 Korean Securities Association Conference, Korea Economic Research Institute, and 2016 Association for Fair Trade Research Summer Symposium for helpful comments and suggestions. Jinhan Pae acknowledges the financial support from Korea University Research Grant.

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Copyright information

© Springer Science+Business Media Dordrecht 2017

Authors and Affiliations

  1. 1.KAIST College of BusinessSeoulSouth Korea
  2. 2.Korea University Business SchoolSeoulSouth Korea

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