Corporate philanthropy and bribery as distinctive responses to economic policy uncertainty: Do state-owned and private firms differ?

Abstract

Frequent changes in economic policy pose challenges to normal business production and operations. However, little is known about the non-market strategies adopted by firms in emerging economies, such as China, in response to economic policy uncertainty. This study proposes that firms in China respond to high levels of economic policy uncertainty by increasing philanthropic donations and bribery. In addition, this study argues that private firms and state-owned firms implement different strategies to cope with economic policy uncertainty. Specifically, the study suggests that state-owned enterprises (SOEs) are more likely, than non-SOEs, to respond to economic policy uncertainty by increasing corporate philanthropy, and less likely to respond by increasing expenditure on bribes. This study obtained empirical evidence to support these views, based on an analysis of a dataset of 2,904 listed Chinese firms from 2008 to 2019. Keywords Economic policy uncertainty • Corporate philanthropy • Corporate bribery • China • State-owned enterprisesIn recent years, the continuous emergence of 'black swan' events, such as Brexit and COVID-19, has led to constant changes in international financial markets.