Does Family Involvement Make Firms Donate More? Empirical Evidence From Chinese Private Firms

Abstract

This article follows recent development on the socioemotional wealth perspective to examine the impact of family involvement on corporate charitable donations. Based on data collected from 2,821 Chinese private firms, we find that (a) family ownership and the duration of family control positively affect charitable donations and (b) when the next generation is unwilling to take over the business, the positive relationship between family ownership and charitable donations becomes weaker. These findings show that firms’ proactive stakeholder engagement is susceptible to family involvement. They also highlight the possible existence of the “dark” effect of certain socioemotional wealth dimensions on firms’ proactive stakeholder engagement.

The role of female directors in promoting CSR practices: An international comparison between family and non‐family businesses

“…Family firms are more strongly oriented than non‐family businesses toward preserving the interests of external stakeholders, but less so toward preserving those of internal stakeholders. Thus, on the one hand, CSR practices may improve the firm's reputation and image, accumulating moral reputational capital that could temper future negative events (Dou et al ., ; Godfrey, Merrill, & Hasen, ). A firm that is considered by its external stakeholders to be socially responsible would enjoy enhanced SEW (Dou et al ., ).…”

“…Thus, on the one hand, CSR practices may improve the firm's reputation and image, accumulating moral reputational capital that could temper future negative events (Dou et al ., ; Godfrey, Merrill, & Hasen, ). A firm that is considered by its external stakeholders to be socially responsible would enjoy enhanced SEW (Dou et al ., ). On the other hand, however, SEW may be used as a self‐serving instrument by the family (e.g., nepotism), and thus some family firms may pursue family interests to the detriment of other stakeholders.…”

“…Among the early researchers in this field, Adams, Taschian, and Shore (1996) argued that, although not bound by formal ethical codes, family businesses tend to present more ethical patterns of behavior than non‐family firms. Subsequent studies have analyzed whether family firms behave differently from their non‐family counterparts in relation to areas such as CSR commitment and performance (e.g., Cruz et al ., ; Marques, Presas, & Simon, ), stakeholder engagement (Cennamo, Berrone, Cruz, & Gómez‐Mejía, ), the natural environment (Berrone et al ., ; Delmas & Gergaud, ) or philanthropy (Dou, Zhang, & Su, ). However, the results obtained are not conclusive.…”

Sustainable Entrepreneurship in China

“…Future research studies topics can be conducted along these lines after observations from multiple countries with different cultural characteristics are collected. Second, both extant research (e.g., Chrisman and Patel, 2012;Dou et al, 2014) and this study use a simple proxy for succession based on whether family members other than the owners serve in the top management team and/or on the board of directors. The SEW perspective covers altruism, which is based on blood ties among family members (Gómez-Mejía et al, 2007), and it characterizes relationship between incumbents and potential successors of family firms in a more detailed approach.…”

“…Family businesses have four dimensions, family ownership, family management, family governance, and intent for succession. Studies have addressed how intent for succession impacts family firms' decisions and behaviors, such as risk taking (Gómez-Mejía et al, 2007), investment decisions in innovation (Chrisman and Patel, 2012), capital structure decisions (Chua et al, 2011), decisions on corporate social responsibilities (Dou et al, 2014), and firm valuation made by family CEOs (Zellweger et al, 2012). Recently, Gómez-Mejía et al (2007) propose a term "socioemotional wealth" (SEW) to capture the nonfinancial goals of family firms on the basis of the famous prospect theory (Kahneman and Tversky, 1979), one of the fundamental theories in behavioral economics and behavioral finance.…”