Do Political Connections Buffer Firms from or Bind Firms to the Government? A Study of Corporate Charitable Donations of Chinese Firms

Do political connections buffer firms from or bind firms to the government? To examine this theoretical puzzle, we distinguish two types of managerial political connections, ascribed and achieved, and theorize that these different types of ties either buffer firms from or bind firms to government demands. Furthermore, we propose that these effects are contingent on both industrial and regional institutional conditions. We test our framework with a unique panel data set of privately controlled listed firms’ charitable donations in China from 2001 to 2012. We find that firms whose executives have ascribed bureaucratic connections are more likely to use their connections as a buffer from governmental donation pressure, particularly in competitive industries and less market-oriented regions, whereas in state-monopolized industries this buffering effect is reduced. In contrast, achieved political connections are more likely to serve a binding function that facilitates donation, particularly in state-monopolized industries and more market-oriented regions, but in less market oriented regions, they buffer firms from the pressure to donate. Our research contributes to the literatures on the effects of political connections, the institutional contingencies of political connections, and the relationship between corporate social responsibility (CSR) and corporate political activities (CPA)

Non-profit organizations as a nexus between government and business in an emerging market: Evidence from Chinese charities

Research summary Non-profit organizations in emerging markets frequently have to manage relations with governments and for-profit firms. We advance a multi-stakeholder perspective and develop propositions about how the political ties of charities influence their success in raising funds from corporate donors. Evidence from 2,054 Chinese charities during 2005-2012 shows that organizational political ties, established through formal affiliation with the government, aid fundraising from corporate donors, whereas personal political ties, formed through personal political services of senior leaders of charities, have no such effect. The positive effect of government affiliation is relevant for both foreign and domestic donors, but stronger for domestic ones. These results highlight the differential impact and contingent value of political embeddedness for charities’ ability to acquire resources from for-profit business, contributing to both stakeholder theory and the political embeddedness perspective. Managerial summary Non-profit organizations have to maintain productive relations with multiple stakeholders, including government and business. We focus on Chinese charities that seek to raise funds to fulfill their mission. We identify how their political relations influence the behavior of corporate donors. Evidence from 2,054 charities from 2005-2012 shows that political ties formed through organizational affiliation with a political body help charities attract corporate donors that seek legitimacy. In contrast, ties formed through personal connections with politicians have less influence on donors who perceive a high risk of connected insiders engaging in activities of dubious legality. The value of political ties is more pronounced for domestic corporate donors

Corporate Philanthropy and CEO Outside Directorships Under Authoritarian Capitalism

Scholars have long suggested that CEOs can benefit from corporatephilanthropy. However, little is known about this relationship in contextsof authoritarian capitalism such as China, where the state not only uses itscontrol of economic entities to pursue social goals but also plays a key rolein CEOs’ careers. We theorize how corporate philanthropy among statecontrolledfirms increases the CEO’s likelihood of receiving career benefitsfrom the state in the form of outside directorships. Outside directorshipsrepresent an important form of social capital in the Chinese context, andcorporate philanthropy is an important mechanism through which socialcapital can be acquired. In addition, we theorize how two factors—thedegree of state ownership and the number of independent directors onthe CEO’s board—moderate this relationship. Analyzing a 12-year panelof state-controlled, publicly-listed firms in China comprising 6,594 firm-yearobservations, we find general support for our ideas. In so doing, wecontribute to scholarship on the business–society relationship and corporategovernance in the context of authoritarian capitalism

Political connections: a literature review approach

The aim of this study was to highlight the key finding of corporate politicalconnections research. This study used 61 previous studies related tocorporate political connections to develop a structured literature review. Itwas found that most studies were conducted in developing countries as theyprovided a unique institutional setting for conduct political connectionsresearch. In addition, a political connection is used as independentvariables and the previous studies focuses on three related topics, whichare corporate performance, corporate action, and loan and special rights.Literature review study become more important nowadays, as the numberof empirical quantitative research amount has been increased lately. Thisanalysis also has research and practical implementation for researcher,practitioners, and regulators

The management of socio‐political issues and environments::Toward a research agenda for corporate socio‐political engagement

Socio-political issues and environments are becoming more complex and challenging. In this introduction to the special issue on ‘The Management of Socio-Political Issues and Environments: Organizational and Strategic Perspectives’, we take stock of the burgeoning research on how firms interact with socio-political actors and environments over the last few decades, specifically research on Corporate Political Activity and Corporate Social Responsibility. We then argue that the socio-political environments and actors with which firms interact are in a state of flux, such that issues are more interrelated and dynamic, and actors are more diverse and demanding. As such, we propose a new concept of corporate socio-political engagement (CSPE), which represents a more holistic perspective to understanding complex interactions among firms and their social/political stakeholders, incorporating and transcending conventional notions and tactics documented in the extant nonmarket strategy literature. Using a two-dimensional framework that captures the identity of socio-political actor or the nature of socio-political issues (political, social, or both) as well as the relevant level of analysis at which the interactions unfold, we showcase the contributions of the special issue articles to this research agenda. Finally, we discuss and specify future research directions for revealing the multifaceted nature of CSPE

Channeling and dampening: The role of political ties in information disclosure and concealment

Non-profit organizations (NPOs) help the state achieve its social objectives. At the same time, they often depend on the private-sector actors for donations. The different beliefs of public- and private-sector actors regarding which practices are desirable for NPOs can affect the transparency of these organizations. We propose that political ties influence NPOs to comply with state-mandated disclosure requirements, while simultaneously dampening their willingness to voluntarily disclose sensitive information that may jeopardize their legitimacy in the eyes of private-sector stakeholders. The impact of political ties on disclosure is contingent upon two factors. First, market institutions moderate such effects because expectations of public- and private-sector actors may diverge more in freer markets than where the state has inordinate power. Second, financial dependence on the state amplifies both effects as dependence on the state exerts more pressure for compliance whilst making politically connected organizations appear even more questionable in the eyes of the private-sector stakeholders. Leveraging a policy shock that weakened political ties, we found that following the policy shock, charities in China reduced their compliance to state-mandated information disclosure, but increased their voluntary disclosure. The opposing roles of political ties in mandatory versus voluntary disclosure is further supported by a policy capturing study involving private donors in China. This study has important implications for research on political ties and information disclosure

Multiple-Principal Demands and CEO Compliance in Emerging Market State-Owned Enterprises

This study addresses multiple-principal–agent power dynamics in state-owned enterprises (SOEs) in emerging markets. We investigate under what conditions agents (CEOs) accede to demands of government-linked principals. Our qualitative study in Indonesia advances agency theory by disaggregating and categorizing government-linked principals. We also examine three types of principals’ demands (commercial, social, and private) and five types of mechanisms influence agent responses with principals’ private demands (collusion among principals, career-ending threats by principals, plausible deniability through CSR, political ties as enabler, political ties as buffer). Based on our findings and on insights from the public administration literature, we develop a conceptual framework that advances multiple agency theory.publishedVersio

Political directors and corporate social responsibility: Are political ideology and regional identity relevant?

This study analyzes the infuence of directors with political connections on corpo‑ rate social responsibility (CSR). Using a sample of Spanish savings banks (cajas) during the period 2004–2013, we analyze the infuence of political directors on the CSR of these entities, focusing on their ideology and regional identity. Our results indicate that the higher the proportion of directors with political ties on the board, the greater the allocation of resources to CSR activities. In addition to this positive efect of board politicization, we fnd that political directors’ liberal ideology posi‑ tively afects CSR, both directly and in moderating the relationship between political directors and CSR. Our results also validate that political directors’ regional iden‑ tity boosts the positive efect they have on CSR. Finally, we encounter various dif‑ ferences depending on the nature of the projects funded through CSR. Therefore, our study demonstrates the importance of delving into the characteristics of political directors to elucidate their efects on corporate policies.Open Access funding provided thanks to the CRUE-CSIC agreement with Springer Nature. This study was supported by the Spanish Ministry of Economy and Competitiveness (Grant ECO201785356), the UAM - Comunidad de Madrid (SI3-PJI-2021-00276) and it benefted from the Professorship Excellence Program in accordance with the multi-year agreement signed by the Government of Madrid and the Autonomous University of Madrid (Line #3)