J Bus Ethics (2015) 129:341–361
DOI 10.1007/s10551-014-2163-2
Is Corporate Philanthropy Used as Environmental Misconduct
Dressing? Evidence from Chinese Family-Owned Firms
Xingqiang Du
Received: 23 August 2013 / Accepted: 22 March 2014 / Published online: 6 April 2014
Ó Springer Science+Business Media Dordrecht 2014
Abstract In this study, I examine the hidden connection
between corporate philanthropic giving and corporate envi-
ronmental misconduct. Using survey data from Chinese family-
owned firms, I provide strong and consistent evidence to show
that corporate environmental misconduct is significantly posi-
tively associated with corporate philanthropic giving, suggest-
ing that some Chinese family-owned firms act philanthropically
to divert public attention from their environmentally unfriendly
behavior. Moreover, the positive association between corporate
environmental misconduct and corporate philanthropic giving
is less pronounced for politically connected family-owned
firms than for their counterparts. The above results are robust to
various sensitivity tests. My findings suggest that environ-
mental misconduct dressing may be an additional motivation
for corporate philanthropic giving and that different dimensions
of corporate social responsibility may be inherently inconsis-
tent in the given institutional setting.
Keywords Corporate philanthropic giving 
Environmental misconduct  Political connections 
Family-owned firms  Corporate social responsibility
(CSR)  China
Introduction
Corporate philanthropic giving is a crucial dimension of cor-
porate social responsibility (CSR) (Brammer and Millington
2008; Godfrey 2005; Porter and Kramer 2002). Extant studies
have explored strategic, political, altruistic, and managerial
X. Du (&)
Center for Accounting Studies and Accounting Department,
School of Management, Xiamen University, No. 422, Siming
South Road, Xiamen 361005, Fujian, China
e-mail: xqdu@xmu.edu.cn
self-interested motivations for corporate philanthropy (Atkin-
son and Galaskiewicz 1988; Brammer and Millington 2005,
2006; Campbell et al. 1999, 2002; Cowton 1987; Galaskiewicz
1997; Haley 1991; Hess et al. 2002; Neiheisel 1994; Saiia et al.
2003; Sánchez 2000; Seifert et al. 2003; Shaw and Post 1993;
Smith and Stodghill 1994; Vidaver-Cohen and Altman 2000;
Zhang et al. 2010). In addition, a branch of very thin but
growing literature has addressed whether particular wrongdoers
use corporate philanthropy to alleviate negative influences
(Chen et al. 2008; Koehn and Ueng 2010). In some cases,
corporate philanthropy may simply be dressing to overshadow
wrongdoing, aside from strategic, political, altruistic, and
managerial self-interested motivations. In fact, CSR’s multi-
dimensional characteristics may be inherently inconsistent.
More specifically, corporate philanthropy may cover miscon-
duct related to other CSR dimensions such as inferior products,
environmental pollution, employee discrimination, and food
unsafety (Caullin 2002; Chen et al. 2008; Koehn and Ueng
2010; McWilliams and Siegel 2000).
In this study, I focus on the context of Chinese family-
owned firms and two dimensions of CSR, i.e., corporate
philanthropic giving and corporate environmental respon-
sibility, to investigate whether environmental wrongdoers
use corporate philanthropy to (1) generate goodwill and
alleviate negative images in the eyes of the public, and (2)
buy leniency from officials and regulators.1 My study
1
According to one referee’s valuable suggestion, I differentiate two
types of ‘‘what is involved in environmental wrongdoers’ attempts to
generate goodwill through corporate philanthropy.’’ Specifically, I
focus on the first case, in which environmental wrongdoers try to
generate goodwill in the eyes of the general public through corporate
philanthropy, to develop Hypothesis 1. Moreover, environmental
wrongdoers seek to ‘‘buy off’’ officials and regulators with a view to
making them more lenient through corporate philanthropy, and thus I
develop Hypothesis 2.
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focuses on the context of Chinese family-owned firms for the
following reasons: First, recent studies cast doubts on the real
motivations for corporate philanthropy (Chen et al. 2008;
Koehn and Ueng 2010) and suggest that corporate philan-
thropy in China is always for appearance rather than for
substance (Du et al. 2013), which inspires my study to
question philanthropic intents in Chinese family-owned
firms. Second, China, a relation-based economy and the
world’s second largest economy, differs in its cultural,
social, legal, and economic development from other rule-
based economies (Du 2012; Kimber and Lipton 2005). The
complex interaction of these factors in China is suitable for
researchers to understand the real motivation for corporate
philanthropy.2 Finally and especially, rapid economic
growth, reckless environmental pollution, and parsimonious
attitudes toward corporate philanthropy in Chinese family-
owned firms provide a unique setting for examining the
potential causality or hidden connection between corporate
environmental misconduct and corporate philanthropy.
In this study, I perform empirical tests using a sample of
3,008 Chinese family-owned firms. I find that corporate
environmental misconduct (the inverse proxy for corporate
environmental responsibility) is significantly positively
associated with corporate philanthropic giving, suggesting
that environmental wrongdoers use corporate philanthropy to
generate goodwill and alleviate negative impacts of environ-
mentally unfriendly behavior, such as the loss of reputation
due to environmental pollution. In addition, in Chinese fam-
ily-owned firms, I also provide strong evidence to show the
substitutive effects between corporate environmental mis-
conduct and political connections on corporate philanthropic
giving. The above results are robust to various sensitivity tests.
This study contributes to the existing literature in several
ways. First, to the best of my knowledge and literature in
hand, this study is one of very few, if not the first, to empiri-
cally investigate the hidden association between corporate
environmental misconduct and corporate philanthropic giv-
ing. The majority of previous literature emphasizes four
motivations for corporate philanthropic giving: (1) strategic
motivation (Hess et al. 2002; Saiia et al. 2003; Vidaver-Cohen
and Altman 2000), (2) political motivation (Neiheisel 1994;
Sánchez 2000), (3) altruistic motivation (Campbell et al.
1999; Cowton 1987; Shaw and Post 1993), and (4) managerial
self-interested motivation (Atkinson and Galaskiewicz 1988;
Galaskiewicz 1997; Haley 1991). In this study, I document
systematic evidence to show that environmental misconduct
dressing or overshadowing environmental wrongdoing is
another less-recognized motivation for corporate
2
I focus on the context of Chinese family-owned firms and provide
empirical support to Brammer et al. (2009), who find associations
between CSR and the characteristics of the countries where compa-
nies operate.
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X. Du
philanthropy. Considering that developing countries are
recklessly destroying the environment, my study addresses
the concern about the possibility that companies may use
corporate philanthropy to hide environmental transgressions.
Second, I find that the positive association between
corporate environmental misconduct and corporate phil-
anthropic giving is less pronounced for politically con-
nected family-owned firms than for their counterparts. This
finding suggests the substitutive effects between corporate
environmental misconduct and political connections on
corporate philanthropic giving. Therefore, this finding
echoes previous arguments that informal systems influence
corporate philanthropic giving and other CSR dimensions
(Du et al. 2013). More importantly, informal systems such
as political connections may mediate the impacts of other
determinants on corporate philanthropic giving.
Third, using the context of Chinese family-owned firms,
this study sheds light on whether different CSR compo-
nents are inherently consistent. Few studies address inter-
nal relationships among various CSR dimensions such as
corporate philanthropy, environmental responsibility, pro-
duction safety, and employee relations/responsibilities. As
a result, little is known about the relations among different
CSR dimensions. Focusing on two particular dimensions of
CSR, i.e., corporate philanthropic giving and corporate
environmental responsibility, I find a positive association
between corporate environmental misconduct and corpo-
rate philanthropy, suggesting that CSR dimensions may be
inherently inconsistent, and even worse, may conflict.
Finally, focusing on the context of China, the world’s
largest developing country and the second largest economy,
my study provides important supplementation to the existing
literature on CSR. Most literature on CSR, including cor-
porate environmental responsibility and corporate philan-
thropy, focuses on developed markets where corporate
governance mechanisms and business ethics work well, and
where firms may face stronger CSR pressures and demands
to balance stakeholder interests, compared with firms in
emerging markets (Sharfman and Fernando 2008). As a
result, conclusions and findings in previous studies based on
developed markets may fail to fit in with or hold for emerging
markets where CSR awareness is relatively weak (Chen et al.
2008; Gao 2009; Sharfman and Fernando 2008). Therefore,
it is necessary to investigate whether corporate philanthropic
giving and corporate environmental responsibility are
inherently consistent in the context of emerging markets. In
the Chinese context especially, environmental destruction is
severe and corporate philanthropy is relatively passive or
only for show rather than for substance (Du et al. 2013).
Therefore, my findings using the context of China can better
reveal real motivations for corporate philanthropy.
The remainder of the paper is organized as follows. In the
second section, I introduce the institutional background,
Is Corporate Philanthropy Used as Environmental Misconduct Dressing?
review related literature, and develop the research hypoth-
eses. In the third section, I illustrate empirical models and
key variables. In the fourth section, I report the sample
construction, descriptive statistics, and correlation analysis.
In the fifth section and the sixth section, I report and discuss
empirical results and conduct a variety of robustness checks,
respectively. Finally, I summarize the conclusions and
develop ethical implications.
Institutional Background, Literature Review,
and Hypotheses Development
Literature Review
Extant studies have documented systematic evidence on
various motivations for corporate philanthropy (Atkinson
and Galaskiewicz 1988; Campbell et al. 1999; Cowton 1987;
Galaskiewicz 1997; Haley 1991; Hess et al. 2002; Neiheisel
1994; Sánchez 2000; Shaw and Post 1993; Smith and
Stodghill 1994; Vidaver-Cohen and Altman 2000; Zhang
et al. 2010). Overall, the motivations have been identified as
(1) strategic motivation, (2) political motivation, (3) altru-
istic motivation, and (4) managerial self-interest motivation
(Campbell et al. 2002; Seifert et al. 2003; Zhang et al. 2010).
When firms donate their resources to the non-business
community for strategic and bottom-line benefits, their
corporate philanthropy is strategically motivated (Saiia
et al. 2003), essentially based on the traditional profit-
maximizing model. According to the strategic motivation,
corporate philanthropy may also be viewed as a market-
entry strategy (Hess et al. 2002; Smith and Stodghill 1994;
Vidaver-Cohen and Altman 2000; Zhang et al. 2010).
When companies act philanthropically to reduce regu-
lation penalties and assure favoritism for business opera-
tions, their corporate philanthropy is politically motivated
(Neiheisel 1994), mainly to maximize political benefits
rather than to enhance financial returns (Sánchez 2000). As
a result, their philanthropy may help them establish local
community roots and political ties (Zhang et al. 2010).
When corporations consider themselves to be an integral
part of the society that supports their survival, success, and
development (Gray et al. 1995; Richardson and Lanis 2007),
their corporate philanthropy is considered to be altruistically
motivated (Campbell et al. 1999; Cowton 1987; Shaw and
Post 1993). As good citizens, firms feel obligated to con-
tribute to the public welfare without expecting direct bene-
fits, although their philanthropy enhances business ethics,
satisfies moral duties to society, obtains social goodwill, and
adds to their credibility (Avi-Yonah 2008; Williams 2007).
When corporate philanthropy is a channel to aggrandize
the CEO’s self-interests and/or self-image at the expense of
other stakeholders, it is considered to be managerial self-
343
interested, based on agency theory (Atkinson and Gala-
skiewicz 1988; Galaskiewicz 1997; Haley 1991).
Although many philosophers and CSR activists favor
corporate philanthropy, some practitioners, individuals, and
scholars question the real motivations behind corporate
philanthropic giving (Brammer et al. 2009; Chen et al. 2008;
Heugens et al. 2008; Koehn and Ueng 2010) and discuss
whether good or bad motivations drive corporate philan-
thropy (Heugens et al. 2008). A branch of growing literature
also addresses hidden motivations behind corporate philan-
thropy. For example, firms with worse social performances
are more likely to carry out charitable contributions than do
firms with better performances (Chen et al. 2008).
Another response to stakeholders’ concerns and pres-
sures is offsetting in which ‘‘firms can adopt unrelated
spheres to maintain their reputations by offsetting some
bad perceptions with some good actions’’3 (Brammer et al.
2009, p. 593). Many firms restating suspect earnings also
appear on lists of top corporate givers or on lists of most
ethical firms, prompting the suspicion that companies use
philanthropy as moral window-dressing (Koehn and Ueng
2010). Also, firms that are forced to restate suspect earn-
ings use corporate philanthropy not only to divert public
attention from suspect financial results, but also to buy
better reputations after they restate suspect earnings
(Koehn and Ueng 2010).
Overall, the limited but growing literature suggests that
corporate philanthropic giving may be simply window-
dressing to overshadow wrongdoing. In this study, I extend
this line of literature and address the concerns about
whether corporate environmental wrongdoers may use
corporate philanthropy to cover or mitigate the negative
influence of their environmentally unfriendly behaviors.
Environmental Conservation and Corporate
Philanthropy in Chinese Family-Owned Firms
State-owned enterprises and family-owned firms are Chi-
na’s two dominant business forms (Claessens et al. 1999).
Over the past 30 years, the world has witnessed economic
miracle in China’s average annual growth of about 9 %.
The decline of state-owned enterprises and the rise of non-
state-owned enterprises indicate that the private sector is
driving China’s remarkable economic growth (Anderson
et al. 2003; Ding et al. 2008). The All-China Federation of
Industry and Commerce survey also confirms that China
relies on private firms for driving its remarkable economic
growth and for bringing new jobs (McGregor 2004).
3
Previous literature (e.g., Heugens et al. 2004; Meznar and Nigh
1995) addresses how firms buffer against stakeholder pressures
(Brammer et al. 2009).
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Chinese family-owned firms generally use informal
networks of personal relationships based on kinship,
reflecting the Chinese culture’s familial values (Chen 2001;
Kao 1993; Shapiro et al. 2003). A paterfamilias figure with
great authority in both social and economic spheres typi-
cally heads Chinese family-owned firms (Weidenbaum
1996, p. 141) and delegates key activities and positions to
family members. Therefore, Chinese family-owned firms
have a prevalent command culture and can minimize pro-
duction costs through long hours, low wages, and poor
working environments (Ding et al. 2008). Absolute
authority and power, however, may generate unethical and
amoral behavior, and social irresponsibility.
For a long time in China, national macro-industrial
policies explicitly or implicitly discriminated against the
private economy and favored the state-owned economy.
Heavy taxes and increasing costs of labor and raw mate-
rials can especially burden Chinese family-owned firms,
which are most heavily concentrated in manufacturing (see
Panel B of Table 1) and other labor-intensive industries. In
response, Chinese family-owned firms often compete by
emitting carbon toxins, recklessly depleting resources, and
upsetting ecological balances. As a result, competition
destroys ethical behavior (Shleifer 2004), and many Chi-
nese family-owned firms become notorious sweatshops.4
In 2006, China overtook the United States as the world’s
largest greenhouse gas emitter, and thus China bears great
responsibility for global warming (Du et al. 2013; NY-
TIMES 2007). The mountain areas have been severely
damaged. Even worse, excessive industrialization has
severely contaminated water and air (OOSKA news 2013).
For example, during the 2008 Olympic Games in Beijing,
the government had to improve air quality to avoid
endangering the health of the athletes and to mitigate for-
eigners’ negative impressions of China (Du et al. 2013).
The Chinese government has primarily relied on envi-
ronmental laws to promote environmental conservation and
pollution control. In recent years, the Ministry of Envi-
ronmental Protection of China has enacted measures to
require environmental agencies and polluting firms to dis-
close environmental information. Moreover, the 11th and
12th Five-year Plans include legal requirements on envi-
ronmental conservation. Although China’s laws forbid and
punish pollution, environmental destruction persists.
China has laws and regulations compelling family-
owned firms and state-owned enterprises to be environ-
mentally responsible, but China has much noncompliance,
difficult enforcement, frequent changes to laws and
4
Some Chinese family-owned firms are successful because they pay
extremely low wages rather than having highly technological
products. Also, they are often in arrears of staff salaries. At the end
of each year, migrant workers commonly appeal for unpaid wages.
123
X. Du
regulations, and loose regional government interpretations
of laws (Du et al. 2013; Tateisi 2004). Without strong
enforcement, laws and regulations related to environmental
protection are only on paper. Therefore, compared with
developed countries, China’s family-owned firms are still at
preliminary and exploratory stages in establishing envi-
ronmental practices.
Moreover, many Chinese enterprises, especially family-
owned firms, do not embrace corporate philanthropic con-
sciousness. One investigation reveals that 19 of 127 Chinese
companies exhibit ‘‘especially low’’ corporate philanthropic
giving (Baskin 2006). Specifically, Chinese enterprises use
corporate philanthropy as window dressing rather than to bring
about structural change. Rather than believing that ‘‘helping
others will benefit you as well’’ (Lin 2010), many Chinese
family-owned firms, as well as most Chinese billionaires, are
apathetic toward corporate philanthropy. Moreover, some
Chinese family-owned firms make philanthropic promises, but
their promises are more for show than for substance (Du et al.
2013). Even worse, some family-owned firms (e.g., New Hu-
adu, SZ.002264; Wuxi Shangde, NYSE.STP), promised to
donations but were ultimately proven fraudulent.
Overall, the current statuses of corporate philanthropy
and environmental conservation in China motivate my
study to address the hidden association between environ-
mental misconduct and corporate philanthropy.
Hypotheses Development
Corporate philanthropy can be used as a crisis management
tactic to alleviate damaged corporate images and reputa-
tions (Freeman 1984; Godfrey 2005; Koehn and Ueng
2010). Firms fulfill their social responsibility and act
philanthropically in response to stricture, imputation, and
impeachment from stakeholders, competitors, and the
public (Freeman 1984). Specifically, corporate philan-
thropy is a defensive, insurance countermeasure that can
generate positive moral capital and alleviate stakeholders’
negative assessments toward corporate misconduct or
wrongdoing (Godfrey 2005). For example, corporate phi-
lanthropy can serve as an ex post fire-suppressing tactic to
mitigate negative influences of restating suspect earnings
(Koehn and Ueng 2010) and to make firms less vulnerable
to negative events (Godfrey 2005; Peloza 2006).
CSR investment can help firms build a reservoir of
goodwill that helps stakeholders to resist negative infor-
mation (Bhattacharya and Sen 2004). Firms with higher
CSR levels are inclined to build stable government and
community connections that mitigate litigation risks and
government sanctions, preventing harm to future opera-
tions and profitability (McGuire et al. 1988; Peloza 2006;
Sharfman and Fernando 2008). Because corporate philan-
thropy is a crucial CSR dimension and a more valid proxy
Is Corporate Philanthropy Used as Environmental Misconduct Dressing? 345

Table 1 Sample selection

Panel A: Sample selection procedure
Initial observations 4,098

Eliminate observations pertaining to the banking, insurance, and other financial industries (12)
Eliminate observations whose data on corporate philanthropy and environmental misconduct are not available (485)
Eliminate observations whose data on entrepreneurs’ personal characteristics are not available (45)
Eliminate observations whose data on firm-specific control variables are not available (548)
Available observations 3,008
Panel B: Sample distribution by province (Section A) and industry (Section B)
Section A
Province N %

Anhui 73 2.43
Beijing 100 3.32
Chongqing 156 5.19
Fujian 28 0.93
Gansu 32 1.06
Guangdong 259 8.61
Guangxi 43 1.43
Guizhou 54 1.80
Hainan 22 0.73
Hebei 113 3.76
Henan 110 3.66
Heilongjiang 99 3.29
Hubei 143 4.75
Hunan 50 1.66
Jilin 58 1.93
Jiangsu 353 11.74
Jiangxi 49 1.63
Liaoning 123 4.09
Neimenggu 70 2.33
Ningxia 28 0.93
Qinghai 9 0.30
Shandong 220 7.31
Shanxi (Taiyuan) 61 2.03
Shanxi (Xi’an) 62 2.06
Shanghai 244 8.11
Sichuan 109 3.62
Tianjin 92 3.06
Xizang 6 0.20
Xinjiang 41 1.36
Yunnan 28 0.93
Zhejiang 173 5.75
Total 3,008 100

Section B
Industry N %

Agriculture, forestry, husbandry, and fishery 202 6.72

Mining 63 2.09
Manufacturing 1,314 43.68

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Table 1 continued
Section B
Industry
Production and supply of electricity, steam and tap water
Construction
Transportation and warehousing
Information technology
Wholesale and retail
Hotels and restaurants
Real estate
Rental services
Research and technique development
Public facilities management
Community services
Education
Health
Culture and sports
Public administration
Total
for CSR than other single dimension measures (Porter and
Kramer 2002; Saiia et al. 2003; Smith and Stodghill 1994),
we can apply some conclusions and findings about CSR in
extant literature to corporate philanthropy. These findings
additionally support the view that corporate philanthropy is
used to improve reputation and obtain political asylum.
Next, I focus on Chinese family-owned firms to discuss
the association between corporate philanthropy and cor-
porate environmental misconduct. A stream of extant lit-
erature (e.g., Adams et al. 1996; Bingham et al. 2011;
Déniz and Suárez 2005; Dyer and Whetten 2006, etc.)
finds that family-owned firms have better corporate social
performance than their counterparts because they pay
closer attention to reputation capital (Godfrey 2005).
However, another branch of previous studies (Banfield
1958; Li and Zhang 2010; Margolis and Walsh 2003;
Morck and Yeung 2004) argues that family-owned firms
are always irresponsible because their owners tend to
protect family benefits at the expense of other stake-
holders. Therefore, findings on CSR in family-owned
firms are mixed at best.
In fact, CSR, including environmental responsibility and
corporate philanthropy, is closely related to the specific
development phase in the lifecycle of family-owned firms
(Banfield 1958). In their start-up stages, firms evade fulfilling
corporate environmental responsibility and other dimen-
sions of CSR. In their growing stages, they participate vol-
untarily. In their maturation stages, they participate actively,
and in their declining stages, they participate passively.
Chinese family-owned firms have a relatively shorter history
than family-owned firms in developed markets (Ding et al.
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X. Du
N %
37 1.23
174 5.78
67 2.23
170 5.65
565 18.78
129 4.29
84 2.79
28 0.93
39 1.30
8 0.27
74 2.46
10 0.33
17 0.57
25 0.83
2 0.07
3,008 100
2008), and thus, according to moral capital theory, unethical
or amoral familialism is universal and negatively motivates
CSR in Chinese family-owned firms (Li and Zhang 2010).
China, the ‘‘world’s factory,’’ has shown spectacular
economic growth and modernization, but environmental
concerns are rising (Du et al. 2013; Zeng et al. 2008, 2012)
and polluted air, water, and soil threaten the health of
Chinese residents. Unfortunately, China’s environmental
deterioration is increasingly alarming, and Chinese family-
owned firms are partially responsible for the problem. First,
local governments have relaxed environmental pollution
controls because they pursue economic growth (e.g., GDP
growth) to assure their political success, although officials
vow to punish those who damage the environment.
Because Chinese family-owned firms contribute a signifi-
cant portion of local GDP growth, local officials often
ignore their environmental transgressions. Second, China
has many laws, regulations, and rules to compel Chinese
family-owned firms to protect the environment, but the
laws are overlooked because an independent and efficient
judicial system is lacking (Du 2012). Therefore, Chinese
family-owned firms can reduce production costs and profit
through unscrupulous environmental destruction with
impunity. Third, The World Bank’s (2012) index of ‘‘ease
of doing business’’ shows that China ranks 91 in 183
economies, worse than most other Asian economies such as
Singapore, Korea, Thailand, Malaysia, and Japan (Du
2012). Specifically, extremely heavy tax burdens induce
Chinese family-owned firms to maximize profits at the
expense of environmental destruction. Finally, Chinese
family-owned firms are weakly conscious of the need for
Is Corporate Philanthropy Used as Environmental Misconduct Dressing?
environmental conservation, leading to environmental
pollution and destruction.
In China, along with public awareness and legal require-
ments, family-owned firms know that although they may
escape punishment, environmentally unfriendly behavior will
generate negative images and externalities. Therefore, family-
owned firms increase CSR channels to enhance their social
image (Godfrey 2005). Similarly, polluting firms, desiring to
mitigate their unfavorable public images, choose corporate
philanthropy to reshape their images, win public trust, and
enhance their reputation. Freeman (1984), Godfrey (2005), and
Koehn and Ueng (2010) recognize that argument and find that
philanthropy can divert public attention from negative events.
For example, in 2010, Chinese environmental authorities
confirmed that Zijin Mining Group Ltd. leaked mining acids
that damaged the Tingjiang River in Fujian province. However,
the company escaped severe economic sanctions, and was
ultimately fined US $3.20 million (Chinese RMB 19.50 mil-
lion) (YiCai 2010). For comparison, its income statement for
financial year 2010 shows that the company’s total revenue was
about US $4.6 billion. As a result, after paying the penalty, its
net income was still US $779 million. Obviously, the penalty
accounted for only a small percentage of company earnings.
Shortly after the incident, the company donated
US $8.20 million to the local Bureau of Civil Affairs. There-
fore, in the case of Zijin Mining, corporate philanthropy was an
attempt to buy the public’s general goodwill.
Based on the aforementioned discussions, I predict that
Chinese family-owned firms with environmental miscon-
duct will use corporate philanthropy to divert public
attention from the negative impact of environmentally
unfriendly behavior and to generate goodwill in the eyes of
the public through corporate philanthropy. Therefore, I
formulate Hypothesis 1 as below:
Hypothesis 1 Ceteris paribus, for Chinese family-owned
firms, corporate environmental misconduct is positively
associated with corporate philanthropic giving.
Next, I focus on China’s unique institutional setting and
further address whether political connections, as informal
systems, can mediate the association between environmental
misconduct and corporate philanthropy for the following
reasons: First, political connections have been shown to be
linked with corporate philanthropy (Claessens et al. 2008;
Gu et al. 2013). In brief, Chinese family-owned firms act
philanthropically to better protect their property rights and
nurture their political connections (Su and He 2010). This
study extends those findings by examining the substitutive
effects between political connections and environmental
misconduct on corporate philanthropy.
Second, in China, political connections are a major and
distinct form of guanxi. Because the Chinese stock market
is highly regulated and formal systems are flawed, Chinese
347
family-owned firms seek informal channels to build polit-
ical connections with government officials to hedge against
policy uncertainties (Fan et al. 2007).5
Third, a firm’s approach to corporate philanthropic giving
may demonstrate the tone at the top (NCFFR 1987), which is
closely bound with the CEO’s personal characteristics
(Hunton et al. 2011). Thus, different CEOs will have different
philosophies regarding philanthropy. For Chinese family-
owned firms, political connections are very important among
various CEO personal characteristics. As a result, political
connections are likely to affect corporate philanthropy.
Finally, more directly related with this study, political
connections are crucial for giving political asylum to CEOs
and Chinese family-owned firms so that they avoid punish-
ment and gain penalty immunity for wrongdoings (Chaney
et al. 2009). Specific to environmental misconduct, politically
connected CEOs in Chinese family-owned firms may be
exempt from criminal punishment. For example, as men-
tioned earlier, Zijin Mining Group Ltd. seriously polluted the
environment in 2010. However, the company was fined a
nominal amount of about US $3.20 million. The company’s
politically connected CEO, Jinghe Cao, escaped criminal
liability. Therefore, politically connected CEOs and their
enterprises have lower risk of punishment for environmental
wrongdoing. Furthermore, for Chinese family-owned firms, I
extrapolate that political connections negatively attenuate the
positive association between corporate philanthropic giving
and corporate environmental misconduct.6
Overall, politically connected Chinese family-owned firms
seek to ‘‘buy off’’ officials and regulators to make them more
lenient through corporate philanthropy and thus to reduce the
negative influence of their environmental misconduct, sug-
gesting the substitutive effects between political connections
and environmental misconduct on corporate philanthropy.
Therefore, I formulate the following Hypothesis 2:
5
Politically connected firms show worse post-IPO performance (Fan
et al. 2007), more bank debt but lower rates (Khwaja and Mian 2005),
lower effective tax rates (Adhikari et al. 2006), and more government
assistance and financial subsidies (Faccio et al. 2006).
6
Two examples demonstrate the problem more directly. British
Petroleum was fined $7.8 billion for an oil spill in the Gulf of Mexico in
2010 (Financial Times 2011a, b). One year later, ConocoPhillips and
Cnooc damaged China’s Bohai Bay, but the Chinese regulator fined
them $26.9 million although their damage was even more severe
(Xinhua 2012). Why was the cost of illegality so low? The reason is
complicated. Chinese environmental laws often lack effective enforce-
ment provisions (Wang 2006). China’s court system remains weak;
judges are poorly trained; and local governments with financial interest
in the polluting enterprises regularly intervene (Van Rooij and Lo 2010;
Wang 2006). More important, the CEO of Cnooc is a government
official and thus Cnooc is a politically connected firm, so that
ConocoPhillips and Cnooc paid a nominal fine far below the fine in
the case of British Petroleum. The media subsequently reported that
ConocoPhillips and Cnooc were donating philanthropically.
123
348
Hypothesis 2 Ceteris paribus, the positive association
between corporate environmental misconduct and corpo-
rate philanthropic giving is less pronounced for politically
connected family-owned firms than for their counterparts.
Empirical Models Specification and Variables
Multivariate Test Model for Hypothesis 1
To test Hypothesis 1, I estimate Eq. (1) including corporate
environmental misconduct (ENV_MIS), entrepreneurs’
personal characteristics variables, firm-specific control
variables, and industry and province dummies:
GIVING ¼ a0 þ a1 ENV MIS þ a2 PRO QUA
þ a3 EMPLOYEE þ a4 GENDER þ a5 EDU
þ a6 AGE þ a7 DUAL þ a8 SGM þ a9 DBOARD
þ a10 SBOARD þ a11 SIZE þ a12 LEV þ a13 ROS
þ a14 FIRMAGE þ a15 GDP PC
þ Industry Dummies þ Province Dummies
þ e:
In Eq. (1), the dependent variable is GIVING. GIVING is
the label of corporate philanthropic giving, measured as the
amount of corporate philanthropic giving scaled by sales
revenue. The main independent variable in Eq. (1) is
ENV_MIS, the label of corporate environmental misconduct.
ENV_MIS is measured as the fine (multiplied by 1,000) due to
corporate environmental misconduct scaled by sales revenue.
In Eq. (1), if the coefficient on ENV_MIS (i.e., a1) is positive
and significant, empirical evidence supports Hypothesis 1.
In Eq. (1), to isolate the influence of environmental
misconduct on corporate philanthropy, I refer to extant
literature (e.g., Chen et al. 2008; Du et al. 2013; Gao et al.
2012; Zhang et al. 2010) and include a set of control
variables as below7: (1) Product quality and employee
relations are two important factors to influence corporate
philanthropic giving (Chen et al. 2008; Gao et al. 2012). To
capture whether firms act philanthropically in response to
low product quality, I include PRO_QUA in Eq. (1).
Because of data limitation, PRO_QUA is defined as a
dummy variable, equaling 1 if a Chinese family-owned
firm has been given one or more authoritative verifications
(e.g., ISO9000, CE, QS), viewed as a link with higher
product quality, and 0 otherwise. EMPLOYEE is included
in Eq. (1) to address concerns about whether and how
7
In this study, Chinese family-owned firms are private and do not
publicize their financial statements (including earnings), and thus they
do not provide information about financial statements restatement.
Thus, I cannot follow Koehn and Ueng (2010) to include a control
variable related with financial statements restatement into Eq. (1).
123
X. Du
employee relations affect corporate philanthropy (Chen
et al. 2008). EMPLOYEE is measured as employees’
annual total salaries and bonus scaled by sales revenue. (2)
Following Du et al. (2013) and Wang and Coffey (1992), I
include personal characteristics of founder entrepreneurs
such as GENDER, EDU, and AGE in Eq. (1). GENDER is
an indicator variable, equaling 1 if the entrepreneur is a
woman and 0 otherwise. EDU is the ordered variable and
the inverse proxy for an entrepreneur’s educational back-
ground, measured as 1, 2, 3, 4, 5, and 6 for postgraduate or
above, bachelor’s degree, college, senior high school,
junior high school, and primary school, respectively. AGE
is the age of a firm’s entrepreneur. (3) I refer to Du et al.
(2013) and include four corporate governance variables
such as DUAL, SGM, DBOARD, and SBOARD in Eq. (1).
DUAL is an indicator variable, equaling 1 if a family-
owned firm’s entrepreneur serves as the CEO and the
chairman simultaneously and 0 otherwise. SGM is an
indicator variable, equaling 1 if a family-owned firm has its
shareholders’ general meeting (SGM) and 0 otherwise.
DBOARD is an indicator variable, equaling 1 if a family-
owned firm has installed a board of directors (DBOARD)
ð1Þ
and 0 otherwise. SBOARD is an indicator variable, equal-
ing 1 if a family-owned firm has a board of supervisors
(SBOARD) and 0 otherwise. (4) A number of previous
studies have documented systematic evidence that firm
characteristics have important impacts on corporate phi-
lanthropy (Adams and Hardwick 1998; Amato and Amato
2007, 2012; Brammer and Millington 2004, 2005, 2006;
Campbell and Slack 2006; Chen et al. 2008; Coffey and
Wang 1998; Crampton and Patten 2008; Du et al. 2013;
Galaskiewicz 1997; Gao et al. 2012; Muller and Whiteman
2009; Orlitzky 2001; Wang and Coffey 1992; Useem 1988;
Zhang et al. 2010). Overall, those studies find that firm
size, profitability, and financial leverage impact corporate
philanthropy, including whether to carry out philanthropy
and at what level. Therefore, I include four firm charac-
teristics, i.e., SIZE, LEV, ROS, and FIRMAGE, in Eq. (1).
SIZE is measured as the natural log of sales revenue in the
year. LEV is measured as the amount of a family-owned
firm’s bank loans scaled by sales revenue in the year. ROS
is measured as net income scaled by sales revenue in the
year. FIRMAGE is the number of years since a family-
owned firm’s foundation. The definitions of SIZE, LEV,
and FIRMAGE are not fully aligned with extant empirical
literature due to the limitation of survey data, but they are
similar to those in Jiang et al. (2013) that uses the same
survey data. (5) I also refer to Du et al. (2013) and include
GDP_PC to control the influence of regional development
level on corporate philanthropy. GDP_PC is measured as
the GDP per capita (in thousand Chinese Yuan) at the
province level. (6) I also include industry dummies and
province dummies in Eq. (1) to control the industry and
Is Corporate Philanthropy Used as Environmental Misconduct Dressing?
province fixed effects. Appendix Table 9 provides variable
definitions in detail.
Multivariate Test Model for Hypothesis 2
To test Hypothesis 2, I estimate Eq. (2) including
ENV_MIS, political connections (POL_CON), the interac-
tion (ENV_MIS 9 POL_CON), entrepreneurs’ personal
characteristics variables, firm-specific control variables,
and industry and province dummies:
GIVING ¼ b0 þ b1 ENV MIS þ b2 POL CON
þ b3 ENV MIS  POL CON þ b4 PRO QUA
þ b5 EMPLOYEE þ b6 GENDER þ b7 EDU
þ b8 AGE þ b9 DUAL þ b10 SGM
þ b11 DBOARD þ b12 SBOARD þ b13 SIZE
þ b14 LEV þ b15 ROS þ b16 FIRMAGE
þ b17 GDP PC þ Industry Dummies
þ Province Dummies þ d: ð2Þ
In Eq. (2), POL_CON is the label of political connections.
POL_CON is an indicator variable, equaling 1 if the entre-
preneur served as an official in central or local governments
before becoming the founder of a Chinese family-owned firm
and 0 otherwise (Fan et al. 2007). In Eq. (2), if the coefficient
on ENV_MIS 9 POL_CON is negative and significant,
Hypothesis 2 is valid. In addition, according to Hypothesis 1
and the previous literature (e.g., Su and He 2010), the coef-
ficients on ENV_MIS and POL_CON are expected to be sig-
nificantly positive, respectively. All control variables in
Eq. (2) are the same as those in Eq. (1). Appendix Table 9
shows variable definitions in detail.
Sample, Data, and Descriptive Statistics
Identification of Sample
The initial list in the sample includes 4,098 observations.
Panel A of Table 1 summarizes the sample selection process.
First, I eliminate observations pertaining to banking, insur-
ance, and other financial industries. Second, I delete obser-
vations with unavailable data on corporate philanthropy and
environmental misconduct. Third, I exclude observations with
unavailable data on entrepreneurs’ personal characteristics.
Fourth, I eliminate observations with unavailable data on firm-
specific control variables. Finally, I obtain a sample of 3,008
observations. Then, to alleviate the potential influence of
extreme observations, I winsorize the top and bottom 1 % of
each continuous variable’s distribution.8
8
Results are not qualitatively changed by deleting the top and bottom
1 % of the sample, by no deletion, or by no winsorization.
349
Panel B of Table 1 displays the sample distribution by
geography (i.e., province) and industry. As Section A of
Panel B shows, family-owned firms from all 31 Chinese
mainland provinces distribute fairly evenly. Most prov-
inces house less than 10 %, except for Jiangsu, and only six
provinces have more than 5 % of family-owned firms in
the sample. In addition, as Section B shows, most Chinese
family-owned firms are in manufacturing (43.68 %) and
wholesale and retail (18.78 %).
Data Source
I obtain data of corporate philanthropic giving (GIVING),
environmental misconduct (ENV_MIS), political connec-
tions (POL_CON), gender (GENDER), education level
(EDU), entrepreneur’s age (AGE) from a 2008 Chinese
survey conducted jointly by (1) the United Front Work
Department of the CPC Central Committee; (2) the All-
China Federation of Industry & Commerce; (3) the State
Administration for Industry and Commerce of the People’s
Republic of China; and (4) the Private Economy Research
Institute of China. Survey respondents are private entre-
preneurs chosen randomly from 31 provinces, municipali-
ties, and autonomous regions in Mainland China.
The 2008 Chinese survey also provides firm-specific
information about Chinese family firms such as firm size
(SIZE), financial leverage (LEV), financial performance
(ROS), firm age (FIRMAGE), corporate governance
(DUAL, SGM, DBOARD, and SBOARD), production status
(PRO_QUA), and employee salary (EMPLOYEE). In
addition, the survey queries the development dilemmas that
confront Chinese family-owned firms and private entre-
preneurs’ thoughts and requirements for the central and/or
local governments to effectively help private firms develop
soundly (Jiang et al. 2013). In addition, I obtain the data of
GDP_PC at the province-level from the 2008 China Sta-
tistical Yearbook and match them to each observation.
Descriptive Statistics
Table 2 reports descriptive statistics of variables used in
this study. Table 2 shows that the mean (median) value of
GIVING, the dependent variable, is 0.0041 (0.0005),
revealing the basic characteristic of corporate philanthropic
giving in Chinese family-owned firms.9 In addition, note
9
China’s economy is growing rapidly, but Chinese enterprises are
still forming their business ethics and codes of ethics (Du 2012), and
firms universally lack CSR consciousness. As a result, corporate
philanthropy and environmental responsibility are poorly realized.
Although firms are spending a relatively small percentage on
philanthropy on average, the average amount of corporate philan-
thropy is significantly larger for Chinese family-owned firms with
environmental misconduct (mean value = 199,794.87 and maximum
123
350 X. Du

Table 2 Descriptive statistics Variable N Mean SD Min Q1 Median Q3 Max

GIVING 3,008 0.0041 0.0106 0.0000 0.0000 0.0005 0.0031 0.0752

ENV_MIS 3,008 0.0015 0.0140 0.0000 0.0000 0.0000 0.0000 0.1364
POL_CON 3,008 0.1759 0.3808 0 0 0 0 1
PRO_QUA 3,008 0.4372 0.4961 0 0 0 1 1
EMPLOYEE 3,008 0.1620 0.2146 0.0001 0.0348 0.0833 0.1917 0.9600
GENDER 3,008 0.1539 0.3609 0 0 0 0 1
EDU 3,008 3.0133 1.1882 1 2 3 4 6
AGE 3,008 45.5123 8.4981 19 40 45 52 84
DUAL 3,008 0.8660 0.3407 0 1 1 1 1
SGM 3,008 0.4990 0.5001 0 0 0 1 1
DBOARD 3,008 0.4870 0.4999 0 0 0 1 1
SBOARD 3,008 0.2955 0.4564 0 0 0 1 1
SIZE 3,008 16.0161 2.1537 10.3090 14.5087 16.1181 17.8409 20.5001
All the variables are defined in
LEV 3,008 0.2169 0.5765 0.0000 0.0000 0.0120 0.1719 4.1667
Appendix Table 9. In this study,
I winsorize the top and bottom ROS 3,008 0.0914 0.1941 -0.4667 0.0100 0.0437 0.1000 0.9738
1 % of each of the continuous FIRMAGE 3,008 8.3723 4.8679 2 5 7 11 28
variables to exclude the effect of GDP_PC 3,008 28.4958 15.1687 7.2730 16.3860 26.7770 34.2940 62.0410
outliers

that the distribution of GIVING does not obey standard
normal distribution,10 indicating that I should adopt Tobit
regression approach rather than OLS regression procedures.
The mean value of ENV_MIS is 0.0015, suggesting that
the average fine for environmental misconduct is about
0.15 % of sales revenue of Chinese family-owned firms.
The mean value of POL_CON is 0.1759, meaning that
about 17.59 % of entrepreneurs of Chinese family-owned
firms served as officials in central or local governments
before they founded their firms.
As for control variables, results in Table 2 reveal the
following aspects: (1) The mean value of PRO_QUA is
0.4372, suggesting that 43.72 % of Chinese family-owned
firms have been given one or more authoritative verifica-
tions such as ISO9000, CE, QS. (2) The mean value of
EMPLOYEE is 0.1620, meaning that employees’ annual
total salaries and bonus equal about 16.20 % of annual
sales revenue. (3) GENDER has a mean value of 0.1539,
meaning that 15.39 % founder entrepreneurs are women.
(4) The mean value of EDU is 3.0133, meaning that
Footnote 9 continued
value = 50,000,000; Unit: RMB) than for their counterparts (mean
value = 96,511.62 and maximum value = 2,600,000; Unit: RMB).
10
Referring to Shapiro and Wilk (1965), Shapiro and Francia (1972),
and D’Agostino et al. (1990), I conducted three tests to examine
whether corporate philanthropic giving in the sample obeys the
normal distribution, respectively. The non-tabulated results show that
the null hypothesis that ‘‘corporate philanthropic giving obeys
standard normal distribution’’ is rejected at the 1 % level regardless
of test approaches used. The non-tabulated results are available from
the author on request (similarly hereafter).
founder entrepreneurs, on average, have college educations
in the sample. (5) AGE has a mean value of 45.5123,
suggesting that founder entrepreneurs of Chinese family-
owned firms are about 45.51-year-old on average. (6) The
mean value of DUAL is 0.8660, indicating that 86.60 % of
founder entrepreneurs serves simultaneously as the chair-
man and CEO in their firms. (7) The mean values of SGM,
DBOARD, and SBOARD are 0.4990, 0.4870, and 0.2955,
suggesting that the SGM, the DBOARD, and the SBOARD
are installed into 49.90, 48.70, and 29.55 % of Chinese
family-owned firms to improve corporate governance,
respectively. (8) The descriptive statistics of SIZE indicate
that annual sales revenue of Chinese family-owned firms is
about 80 million Chinese Yuan on average. (9) LEV has a
mean value of 0.2169, suggesting that the amount of Chi-
nese family-owned firms’ bank loans reaches 21.69 % of
annual sales revenue on average. (10) The mean value of
ROS is 0.0914, indicating that the average return on sales is
about 9.14 %. (11) The mean value of FIRMAGE is
8.3723, meaning that Chinese family-owned firms average
about 8.37 years in the sample. (12) GDP_PC has a mean
value of 28.4958, suggesting the average province-level
GDP per capita is 28,495.80 Chinese Yuan.
Pearson Correlation Analysis
Table 3 reports Pearson correlation analysis of variables
used in this study. The p value is in parentheses below the
coefficient. Results in Table 3 reveal the following aspects:
(1) GIVING is significantly positively correlated with
ENV_MIS at the 1 % level (0.0549 with p value = 0.0026),
suggesting a positive association between corporate

123
 Table 3 Pearson correlation matrix
Variable (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17)

(1) GIVING 1
(2) ENV_MIS 0.0549 1
(0.0026)
(3) POL_CON 0.0361 -0.0094 1
(0.0480) (0.6077)
(4) PRO_QUA 0.0730 0.0194 0.0436 1
(0.0001) (0.2874) (0.0169)
(5) EMPLOYEE 0.2438 -0.0026 0.0053 0.1647 1
(\.0001) (0.8850) (0.7708) (\.0001)
(6) GENDER 0.0105 -0.0371 0.0062 -0.1048 0.0608 1
(0.5652) (0.0417) (0.7327) (\.0001) (0.0009)
(7) EDU -0.0181 -0.0452 -0.2426 -0.1300 0.0273 -0.0087 1
(0.3198) (0.0132) (\.0001) (\.0001) (0.1341) (0.6353)
(8) AGE -0.0265 0.0030 0.0774 0.1202 -0.0373 -0.0979 0.1923 1
(0.1458) (0.8689) (\.0001) (\.0001) (0.0408) (\.0001) (\.0001)
(9) DUAL -0.0064 0.0049 0.0022 0.0751 -0.0322 -0.0675 0.0496 0.0154 1
(0.7243)
Is Corporate Philanthropy Used as Environmental Misconduct Dressing?

(0.7878) (0.9023) (\.0001) (0.0779) (0.0002) (0.0065) (0.3971)

(10) SGM -0.0434 0.0029 0.0629 0.0467 -0.0280 -0.0369 -0.1270 -0.0013 -0.0232 1
(0.0173) (0.8724) (0.0006) (0.0105) (0.1243) (0.0429) (\.0001) (0.9420) (0.2027)
(11) DBOARD -0.0461 -0.0009 0.1317 0.2153 -0.0926 -0.0746 -0.2169 0.0569 0.0123 0.1795 1
(0.0115) (0.9618) (\.0001) (\.0001) (\.0001) (\.0001) (\.0001) (0.0018) (0.5017) (\.0001)
(12) SBOARD -0.0240 0.0151 0.1237 0.1738 -0.0716 -0.0744 -0.1446 0.0604 -0.0083 0.3109 0.4898 1
(0.1888) (0.4089) (\.0001) (\.0001) (0.0001) (\.0001) (\.0001) (0.0009) (0.6478) (\.0001) (\.0001)
(13) SIZE -0.2629 0.0396 0.0623 -0.4038 -0.5816 -0.1232 -0.1937 0.1164 0.0377 0.1047 0.3233 0.2491 1
(\.0001) (0.0300) (0.0006) (\.0001) (\.0001) (\.0001) (\.0001) (\.0001) (0.0385) (\.0001) (\.0001) (\.0001)
(14) LEV 0.1548 0.0070 0.0315 0.0092 0.1815 -0.0291 -0.0189 0.0259 0.0073 0.0624 0.0406 0.0578 -0.1188 1
(\.0001) (0.7023) (0.0838) (0.6125) (\.0001) (0.1110) (0.2990) (0.1558) (0.6908) (0.0006) (0.0259) (0.0015) (\.0001)
(15) ROS 0.1908 0.0092 -0.0295 0.0647 0.1731 0.0567 0.0491 -0.0256 -0.0493 -0.0923 -0.1113 -0.0798 -0.2322 0.0155 1
(\.0001) (0.6150) (0.1057) (0.0004) (\.0001) (0.0019) (0.0071) (0.1605) (0.0068) (\.0001) (\.0001) (\.0001) (\.0001) (0.3969)
(16) FIRMAGE -0.0123 0.0048 -0.0341 0.1727 -0.1159 -0.0640 0.0627 0.2750 0.0722 -0.1052 0.0318 -0.0204 0.2053 0.0047 0.0033 1
(0.5003) (0.7944) (0.0616) (\.0001) (\.0001) (0.0004) (0.0006) (\.0001) (0.0001) (\.0001) (0.0814) (0.2643) (\.0001) (0.7960) (0.8551)
(17) GDP_PC 0.0391 -0.0164 -0.0424 0.0743 -0.0096 0.0006 -0.0596 0.0530 -0.0451 -0.0427 0.0041 -0.0504 0.1234 -0.0624 -0.0204 0.0919 1
(0.0322) (0.3676) (0.0200) (\.0001) (0.5973) (0.9731) (0.0011) (0.0036) (0.0133) (0.0192) (0.8228) (0.0057) (\.0001) (0.0006) (0.2629) (\ .0001)

p value is presented in parentheses. All the variables are defined in Appendix Table 9
351

123
352 X. Du

environmental misconduct and corporate philanthropy, Table 4 Regression result of corporate philanthropic giving on
preliminarily supporting Hypothesis 1. (2) GIVING and environmental misconduct and other determinants
POL_CON have a significantly positive correlation coef- Variable Coefficients t value
ficient (0.0361 with p value = 0.0480), meaning that cor-
ENV_MIS 0.0652*** 3.15
porate philanthropy is significantly higher for politically
connected family-owned firms than for their counterparts. PRO_QUA 0.0018*** 2.75
The results together suggest the need to examine the EMPLOYEE 0.0065*** 2.59
interactive effects between corporate environmental mis- GENDER -0.0011 -1.33
conduct and political connections on corporate philan- EDU -0.0008*** -2.64
thropic giving. AGE -0.0001 -0.13
As for Pearson correlation between GIVING and control DUAL 0.0023** 2.43
variables, GIVING displays significantly positive correla- SGM -0.0008 -1.23
tions with PRO_QUA, EMPLOYEE, LEV, ROS, and DBOARD 0.0006 0.89
GDP_PC. Moreover, GIVING and SGM, DBOARD and SBOARD 0.0010 1.37
SIZE have significantly negative correlations. These results, SIZE -0.0008*** -3.75
taken together, suggest a need to control for these variables LEV 0.0021** 2.54
when I examine the influence of corporate environmental ROS 0.0112*** 4.59
misconduct on GIVING. Moreover, as expected, the coeffi- FIRMAGE 0.0003*** 4.63
cients of pair-wise correlation among other control variables GDP_PC 0.0009** 1.97
are generally low, suggesting no serious multicollinearity Constant -0.0074 -0.94
problem when the variables are included in the regression. PROVINCE YES
INDUSTRY YES
Observations 3,008
Empirical Results left-censored observations 1,256
F (p value) 4.20*** (\.0001)
Multivariate Test of Hypothesis 1
Bolded italic values signify the independent variable, the mediating
variable, the interaction, and their coefficients and t-values
Hypothesis 1 predicts that environmental misconduct ***, **, and * represent the 1, 5, and 10 % levels of significance,
(ENV_MIS) is positively associated with corporate philan- respectively, for two-tailed tests. All reported t statistics are adjusted
thropic giving (GIVING). Table 4 reports the Tobit regres- based on Huber–white robust standard errors. All the variables are
sion results of GIVING on ENV_MIS and other determinants. defined in Appendix Table 9
As shown in Table 4, the coefficient on ENV_MIS is
positive and significant at the 1 % level (0.0652 with
t = 3.15), strongly supporting Hypothesis 1. This finding increase in ENV_MIS. Obviously, the coefficient estimate on
can borrow indirect but important support from extant ENV_MIS is both economically and statistically significant.
studies that find that some firms appear to be philanthropic As for the signs and significances of control variables: (1)
but greedily grab profits at the expense of the environment The coefficient on PRO_QUA is positive and significant at the
(Caullin 2002; Chen et al. 2008; Koehn and Ueng 2010). This 1 % level (0.0018 with t = 2.75), suggesting that Chinese
result also reveals: (1) Corporate environmental misconduct family-owned firms with better product quality have higher
is significantly positively associated with corporate philan- levels of corporate philanthropic giving. This result can borrow
thropic giving, suggesting that Chinese family-owned firms support from Brammer and Millington (2006) and McWil-
with environmental misconduct may use corporate philan- liams and Siegel (2000). (2) The coefficient on EMPLOYEE is
thropy to alleviate their negative images. (2) Environmen- positive and significant at the 1 % level (0.0065 with
tally unfriendly firms are motivated toward corporate t = 2.59), meaning that Chinese family-owned firms that are
philanthropy to overshadow their environmental miscon- kind to their employees are inclined to have higher levels of
duct, adding an additional motivation to strategic, political, corporate philanthropic giving. This result echoes previous
altruistic, and managerial self-interested motivations of findings (e.g., Turban and Cable 2003). (3) The coefficient on
corporate philanthropy (Brammer and Millington 2005, EDU is negative and significant at the 1 % level (-0.0008 with
2006; Campbell et al. 2002; Saiia et al. 2003; Seifert et al. t = -2.64), suggesting that educational level is significantly
2003; Zhang et al. 2010). (3) The coefficient estimate on positively associated with the level of corporate philanthropic
ENV_MIS indicates that corporate philanthropy increases giving (EDU is an inverse proxy for educational level). This
about 22.26 % (0.0652 9 0.0140/0.0041) of the mean value result echoes Deshpande (1997). In addition, the coefficient
of GIVING, accompanying one standard deviation variation estimate on EDU means that corporate philanthropy will

123
Is Corporate Philanthropy Used as Environmental Misconduct Dressing? 353

increase (decrease) about 0.23 % of the mean value of GIV-
ING, accompanying one standard deviation variation in edu-
cational level of founder entrepreneurs. (4) The coefficient on
DUAL is significantly positive (0.0023 with t = 2.43), sug-
gesting that corporate philanthropic giving is higher for Chi-
nese family-owned firms with the founder entrepreneurs acting
as the chairman and CEO simultaneously than for their coun-
terparts. (5) SIZE has a significantly negative coefficient
(-0.0008 with t = -3.75), suggesting an inverse relation
between corporate philanthropy and firm size. (6) The coeffi-
cient on LEV is positive and significant at the 5 % level (0.0021
with t = 2.54), consistent with Du et al. (2013). LEV is mea-
sured as the amount of a family-owned firm’s bank loans scaled
by sales revenue, so the result reveals the positive association
between corporate philanthropy and bank loans and thus sug-
gests that lenders applaud corporate philanthropy to some
extent. (7) The coefficient on ROS is positive and significant at
the 1 % level (0.0112 with t = 4.59), indicating the positive
association between corporate performance and corporate
philanthropy. This result is consistent with Du et al. (2013) and
Zhang et al. (2010). Moreover, the coefficient estimate means
that corporate philanthropy will increase (decrease) about
5.30 % of the mean value of GIVING, accompanying one
standard deviation variation in returns on sales. (8) The coef-
ficient on FIRMAGE is positive and significant at the 1 % level
(0.0003 with t = 4.63), suggesting a positive association
between firm age and corporate philanthropy. Moreover, the
coefficient estimate on FIRMAGE means that corporate phi-
lanthropy will increase (decrease) about 0.36 % of the mean
value of GIVING, accompanying one standard deviation var-
iation in FIRMAGE. (9) The coefficient on GDP_PC is sig-
nificantly positive (0.0009 with t = 1.97), consistent with Du
et al. (2013). (10) Other variables have no significant coeffi-
cients except for the variables mentioned.
Multivariate Test of Hypothesis 2
Hypothesis 2 predicts that the positive association between
corporate environmental misconduct and corporate phil-
anthropic giving is less pronounced for politically con-
nected Chinese family-owned firms than for their
counterparts. Table 5 reports the step-by-step Tobit
regression results of GIVING on ENV_MIS, POL_CON,
ENV_MIS 9 POL_CON, and other determinants.
Column (1) reports results of corporate philanthropy on
POL_CON and other determinants. Column (1) shows that
the coefficient on POL_CON is positive and significant at the
10 % level (0.0014 with t = 1.68), suggesting that Chinese
family-owned firms with politically connected founder
entrepreneurs have significantly higher level of corporate

Table 5 Regression results of Variable (1) (2) (3)

corporate philanthropic giving
on environmental misconduct, Coefficients t value Coefficients t value Coefficients t value
political connections, and other
determinants ENV_MIS 0.0659*** 3.17 0.0746*** 3.17
POL_CON 0.0014* 1.68 0.0014* 1.75 0.0014* 1.74
ENV_MIS 9 POL_CON -0.0625** -2.07
PRO_QUA 0.0018*** 2.72 0.0018*** 2.74 0.0018*** 2.77
EMPLOYEE 0.0066*** 2.58 0.0065** 2.57 0.0065** 2.57
GENDER -0.0013 -1.47 -0.0012 -1.37 -0.0012 -1.38
EDU -0.0007** -2.38 -0.0007** -2.19 -0.0006** -2.18
AGE -0.0001 -0.34 -0.0001 -0.36 -0.0001 -0.39
DUAL 0.0023** 2.40 0.0023** 2.39 0.0023** 2.41
SGM -0.0008 -1.27 -0.0008 -1.22 -0.0008 -1.21
DBOARD 0.0005 0.69 0.0005 0.83 0.0005 0.83
SBOARD 0.0009 1.31 0.0009 1.27 0.0009 1.29
SIZE -0.0008*** -3.64 -0.0009*** -3.76 -0.0008*** -3.74
Bolded italic values signify the LEV 0.0021** 2.53 0.0021** 2.52 0.0021** 2.52
independent variable, the ROS 0.0114*** 4.63 0.0112*** 4.59 0.0112*** 4.59
mediating variable, the
interaction, and their FIRMAGE 0.0003*** 4.72 0.0003*** 4.73 0.0003*** 4.74
coefficients and t-values GDP_PC 0.0009** 2.04 0.0009** 1.98 0.0009** 1.97
***, **, and * represent the 1, 5, Constant -0.0081 -1.03 -0.0074 -0.95 -0.0075 -0.96
and 10 % levels of significance, PROVINCE YES YES YES
respectively, for two-tailed
INDUSTRY YES YES YES
tests. All reported t statistics are
adjusted based on Huber–white Observations 3,008 3,008 3,008
robust standard errors. All the left-censored observations 1,256 1,256 1,256
variables are defined in F (p value) 4.15*** (\.0001) 4.16*** (\.0001) 4.13*** (\.0001)
Appendix Table 9

123
354
GIVING
0.012
0.010
0.008
0.006
0.004
0.002
0.000
0.00 0.02 0.04 0.06 0.08
Political connections Without connection
Fig. 1 The graphic representation of the interaction effects between environmental misconduct (ENV_MIS) and political connections
(POL_CON) on corporate philanthropic giving (GIVING). (Color figure online)
philanthropic giving than their counterparts. This finding is
supported from Su and He (2010): Chinese private firms are
philanthropic to establish political connections and to obtain
protections for property rights. In Column (2), I incorporate
ENV_MIS and POL_CON simultaneously into Eq. (2). As
shown in Column (2), the coefficients on ENV_MIS and
POL_CON are significantly positive (0.0659 with t = 3.17
and 0.0014 with t = 1.75, respectively), consistent with
Hypothesis 1 and the finding in Column (1), respectively.
In Column (3), I include simultaneously ENV_MIS,
POL_CON, ENV_MIS 9 POL_CON, and other determinants
into Eq. (2). As shown in Column (3), the coefficient on
ENV_MIS is significantly positive (0.0746 with t = 3.17),
lending additional and strong support to Hypothesis 1 and
consistent with findings in Table 4. Moreover, the coefficient
estimate suggests that corporate philanthropy increases about
25.47 % (0.0746 9 0.0140/0.0041) of the mean value of
GIVING without regarding the factor of political connections,
accompanying one standard deviation increase in ENV_MIS.
Obviously, the magnitude of the coefficient estimate is greater
than that in Table 4 (i.e., 0.0746 [ 0.0652), and furthermore,
the influence of ENV_MIS on GIVING is greater in Table 5
than in Table 4 (i.e., 25.47 [ 22.26 %). Moreover, the coef-
ficient on POL_CON is positive and significant at the 10 %
level (0.0014 with t = 1.74), consistent with findings in Col-
umns (1) and (2) of Table 5.
More important, Column (3) shows that the coefficient on
ENV_MIS 9 POL_CON is negative and significant at the 5 %
level (-0.0625 with t = -2.07), strongly supporting
Hypothesis 2. This result also reveals: (1) As Hypothesis 2
predicts, the positive association between environmental
misconduct and corporate philanthropy is less pronounced
123
X. Du
ENV_MIS
0.10 0.12 0.14 0.16
The full sample
for politically connected family-owned firms than for their
counterparts. (2) The coefficient estimate on ENV_MIS 9 -
POL_CON suggests that the association between environ-
mental misconduct and corporate philanthropy for politically
connected family-owned firms is 83.78 % (0.0625/0.0746)
lower than that for firms without connections. Without doubt,
the magnitude is economically significant.
To better understand the interaction effects between
environmental misconduct (ENV_MIS) and political con-
nections (POL_CON) on corporate philanthropic giving
(GIVING), in Fig. 1, black, blue, and red lines denote the
influence of environmental misconduct on corporate phi-
lanthropy using the full sample, the subsample with polit-
ical connections, and the subsample without connections.
Figure 1 shows an obvious tendency for a less pronounced
positive association between environmental misconduct
and corporate philanthropy for politically connected fam-
ily-owned firms than for their counterparts, providing
visual and straightforward evidence for Hypothesis 2.
The signs and significances of control variables in
Columns (1), (2), and (3) echo each other and are quali-
tatively similar to those in Table 4.
Robustness Checks
Robustness Checks Using the Dummy Variable
of Environmental Misconduct (ENV_MISDUM)
To test whether results in Tables 4 and 5 are robust to the other
measure of environmental misconduct (ENV_MIS), the
independent variable, I re-estimated Eqs. (1) and (2) using the
Is Corporate Philanthropy Used as Environmental Misconduct Dressing? 355

Table 6 Robustness checks of Variable (1) (2)

Hypotheses 1 and 2 using
dummy variable of Hypothesis 1 Hypothesis 2
environmental misconduct
Coefficients t value Coefficients t value

ENV_MISDUM 0.0079*** 3.17 0.0091*** 3.14

POL_CON 0.0015* 1.84
ENV_MISDUM 9 POL_CON -0.0070** -2.00
PRO_QUA 0.0017*** 2.71 0.0018*** 2.73
EMPLOYEE 0.0065** 2.56 0.0064** 2.55
GENDER -0.0012 -1.36 -0.0012 -1.41
EDU -0.0008*** -2.67 -0.0007** -2.21
AGE -0.0001 -0.10 -0.0001 -0.37
DUAL 0.0023** 2.42 0.0023** 2.39
SGM -0.0008 -1.25 -0.0008 -1.23
DBOARD 0.0006 0.89 0.0005 0.83
SBOARD 0.0010 1.40 0.0010 1.32
SIZE -0.0009*** -3.81 -0.0009*** -3.81
Bolded italic values signify the LEV 0.0021** 2.55 0.0021** 2.53
independent variable, the ROS 0.0112*** 4.59 0.0112*** 4.59
mediating variable, the
interaction, and their FIRMAGE 0.0003*** 4.62 0.0003*** 4.73
coefficients and t-values GDP_PC 0.0009* 1.94 0.0009* 1.93
***, **, and * represent the 1, 5, Constant -0.0070 -0.89 -0.0071 -0.91
and 10 % levels of significance, PROVINCE YES YES
respectively, for two-tailed
INDUSTRY YES YES
tests. All reported t statistics are
adjusted based on Huber–white Observations 3,008 3,008
robust standard errors. All the left-censored observations 1,256 1,256
variables are defined in F (p value) 4.20*** (\.0001) 4.15*** (\.0001)
Appendix Table 9

dummy variable of environmental misconduct with the label
of ENV_MISDUM. ENV_MISDUM equals 1 if a Chinese
family-owned firm was fined due to environmentally
unfriendly behavior and 0 otherwise.
Column (1) of Table 6 shows that the coefficient on
ENV_MISDUM is significantly positive (0.0079 with
t = 3.17), strongly and additionally supporting Hypothesis
1. Moreover, the coefficient estimate means that environ-
mental wrongdoers’ philanthropic giving is significantly
higher (about 0.79 %) than their counterparts.
As Column (2) of Table 6 shows, the coefficient on
ENV_MISDUM is still significantly positive (0.0091 with
t = 3.14), consistent with Hypothesis 1. In addition, POL_
CON has a significantly positive coefficient (0.0015 with
t = 1.84), echoing findings in Columns (2) and (3) in Table 5.
More important, the coefficient on ENV_MISDUM 9
POL_CON is negative and significant at the 5 % level
(-0.0070 with t = -2.00), additionally and strongly sup-
porting Hypothesis 2. The coefficient estimate on
ENV_MISDUM 9 POL_CON means that the association
between corporate environmental misconduct and corporate
philanthropic giving for politically connected firms is 76.92 %
(0.0070/0.0091) lower than that for firms without connections.
Overall, using the dummy variable, i.e., ENV_MISDUM,
as the independent variable, results in Table 6 are indis-
tinguishable from those in Tables 4 and 5.
Robustness Checks Using Industry-Mean-Adjusted
Corporate Philanthropic Giving
To further examine whether results in Tables 4 and 5 are
robust to other measures of corporate philanthropy, the
dependent variable, I also use industry-mean-adjusted
corporate philanthropic giving (GIVING_ADJ) as the
dependent variable to re-estimate Eqs. (1) and (2).
Column (1) of Table 7 shows that ENV_MIS has a sig-
nificantly positive coefficient (0.0440 with t = 2.29),
additionally supporting Hypothesis 1.
Column (2) of Table 7 shows that the coefficients on
ENV_MIS and POL_CON are positive and significant
(0.0518 with t = 2.37 and 0.0009 with t = 1.76, respec-
tively), consistent with Hypothesis 1 and the findings in
Table 5, respectively. Furthermore, the coefficient on
ENV_MIS 9 POL_CON is negative and significant at the
5 % level (-0.0547 with t = -2.10), strongly supporting
Hypothesis 2 again.

123
356 X. Du

Table 7 Robustness checks of Variable (1) (2)

Hypotheses 1 and 2 using
industry-mean-adjusted Hypothesis 1 Hypothesis 2
corporate philanthropic giving
Coefficients t value Coefficients t value

ENV_MIS 0.0440** 2.29 0.0518** 2.37

POL_CON 0.0009* 1.76
ENV_MIS 9 POL_CON -0.0547** -2.10
PRO_QUA 0.0005 1.18 0.0005 1.20
EMPLOYEE 0.0054*** 3.10 0.0054*** 3.09
GENDER -0.0007 -1.36 -0.0007 -1.38
EDU -0.0005*** -2.92 -0.0005** -2.46
AGE -0.0001 -0.13 -0.0001 -0.37
DUAL 0.0002 0.28 0.0002 0.27
SGM -0.0007 -1.59 -0.0007 -1.57
DBOARD 0.0003 0.77 0.0003 0.69
SBOARD 0.0006 1.20 0.0005 1.15
SIZE -0.0010*** -6.71 -0.0010*** -6.70
Bolded italic values signify the LEV 0.0016** 2.52 0.0016** 2.51
independent variable, the ROS 0.0069*** 3.91 0.0069*** 3.91
mediating variable, the
interaction, and their FIRMAGE 0.0001*** 2.61 0.0001*** 2.71
coefficients and t-values GDP_PC 0.0001*** 3.57 0.0005** 2.27
***, **, and * represent the 1, 5, Constant 0.0101*** 3.46 0.0056 1.41
and 10 % levels of significance, PROVINCE YES YES
respectively, for two-tailed
INDUSTRY YES YES
tests. All reported t statistics are
adjusted based on Huber–white Observations 3,008 3,008
robust standard errors. All the adj_R2 12.99 % 13.08 %
variables are defined in F (p value) 5.11*** (\.0001) 5.01*** (\.0001)
Appendix Table 9

In sum, results in Table 7 suggest that the main con-
clusions are not qualitatively changed using industry-
mean-adjusted corporate philanthropic giving (GIV-
ING_ADJ) as the dependent variable.
Discussion on the Potential Endogeneity Between
Environmental Misconduct and Corporate Philanthropy
Nevertheless, I conducted the two-stage Tobit–Tobit
regression procedure to control the potential endogeneity
between environmental misconduct and corporate philan-
thropy. I selected ENV_INV, measured as pollution control
expenditures scaled by sales revenue, as the instrument
variable.13 Table 8 reports the second-stage Tobit regres-
sion results.

Theoretically, I cannot rule out the endogeneity between

environmental misconduct and corporate philanthropy in
advance (i.e., the direction of causality). Logically, firms
might risk greater environmental misconduct if they
believe that their philanthropy will help them get relatively
small punishments. Because the database used in this study
does not identify the relative timing of corporate philan-
thropy and environmental misconduct,11 I cannot test
whether corporate philanthropy comes before or after
environmental misconduct.12
11
A referee provides insightful conjecture motivating me to use
empirical data to address this problem in future research.
12
However, the direction of causality or endogeneity in this study is
not a major threat for two reasons: First, corporate philanthropic
giving can be viewed as a defensive countermeasure with insurance
(Godfrey 2005) and a fire-suppressing tactic to mitigate the negative
Footnote 12 continued
influence of wrongdoing (Koehn and Ueng 2010). Second, if a firm is
philanthropic just because of environmental wrongdoing, the public
will inevitably detect the ulterior motives behind the corporate phi-
lanthropy and will expect that the firm’s CEO has an ulterior motive.
A backfire effect will then occur, permanently fracturing the reputa-
tion and suddenly erasing the positive image. In the backfire effect,
found in consumer responses to products, individuals hold their ori-
ginal position even more strongly when confronted with evidence
conflicting with their beliefs (Brown and Dacin 1997; Gao et al. 2012;
Yoon et al. 2003).
13
The two-stage regression procedure greatly depends on using good
instruments. Following Larcker and Rusticus (2010) and Du et al.
(2013), I conducted diagnostic tests to show that ENV_INV is suitable
as the instrument variable. First, ENV_INV significantly affects
environmental misconduct but is less likely to be correlated with
residuals from Eq. (1). Non-tabulated results show that ENV_MIS and
ENV_INV are highly correlated and significant at the 1 % level.
Second, over-identification tests can not reject the appropriateness of

123
Is Corporate Philanthropy Used as Environmental Misconduct Dressing? 357

Table 8 The second-stage Variable (1) (2)

regression results considering
the potential endogeneity Hypothesis 1 Hypothesis 2
between environmental
misconduct and corporate Coefficients t value Coefficients t value
philanthropy
ENV_MIS 0.1700* 1.93 0.2130** 2.24
POL_CON 0.0014* 1.78
ENV_MIS 9 POL_CON -0.5544** -2.40
PRO_QUA 0.0017*** 2.70 0.0017*** 2.62
EMPLOYEE 0.0063** 2.49 0.0064** 2.53
GENDER -0.0011 -1.32 -0.0012 -1.44
EDU -0.0007** -2.45 -0.0006** -2.08
AGE -0.0001 -0.14 -0.0001 -0.42
DUAL 0.0023** 2.33 0.0023** 2.34
SGM -0.0008 -1.25 -0.0008 -1.24
DBOARD 0.0007 0.99 0.0005 0.82
SBOARD 0.0010 1.38 0.0009 1.31
SIZE -0.0009*** -3.89 -0.0009*** -3.77
Bolded italic values signify the LEV 0.0021** 2.53 0.0021*** 2.59
independent variable, the ROS 0.0111*** 4.53 0.0110*** 4.52
mediating variable, the
interaction, and their FIRMAGE 0.0003*** 4.58 0.0003*** 4.72
coefficients and t-values GDP_PC 0.0009* 1.90 0.0009* 1.92
***, **, and * represent the 1, 5, Constant -0.0062 -0.79 -0.0069 -0.88
and 10 % levels of significance, PROVINCE YES YES
respectively, for two-tailed
INDUSTRY YES YES
tests. All reported t statistics are
adjusted based on Huber–white Observations 3,008 3,008
robust standard errors. All the left-censored observations 1,256 1,256
variables are defined in F (p value) 4.19*** (\.0001) 4.12*** (\.0001)
Appendix Table 9

Column (1) of Table 8 shows that the coefficient on
ENV_MIS is significantly positive (0.1700 with t = 1.93),
consistent with Hypothesis 1 and the finding in Table 4.
Moreover, obviously, the coefficient estimate is far above
that in Table 4 (i.e., 0.1700 [ 0.0652).
Column (2) shows that the coefficient on
ENV_MIS 9 POL_CON is negative and significant at the
5 % level (-0.5544 with t = -2.40), strongly supporting
Hypothesis 2 again. In addition, ENV_MIS and POL_CON
have significantly positive coefficients in Column (2),
echoing Hypothesis 1 and findings in Table 5, respectively.
Conclusions
Using survey data from Chinese family-owned firms, I
examine the hidden connection between corporate envi-
ronmental misconduct and corporate philanthropic giving.
Footnote 13 continued
the instrument variable of ENV_INV. Finally, non-tabulated Hausman
test rejects the null hypothesis of no endogeneity for measure of
environmental misconduct.
My findings show that corporate environmental misconduct
is significantly positively associated with corporate phil-
anthropic giving, suggesting that Chinese family-owned
firms that have been environmentally unfriendly use cor-
porate philanthropy to mitigate the negative influence of
their environmental misconduct. Moreover, I also docu-
ment systematic evidence to show the substitutive effects
between political connections and corporate environmental
misconduct on corporate philanthropic giving.
This study has several implications for business ethics and
CSR. First, in the context of Chinese family-owned firms, I
find a positive association between environmental miscon-
duct and corporate philanthropy, suggesting that the desire to
obscure environmental misconduct may motivate corporate
philanthropic giving, in addition to strategic, political,
altruistic, and managerial self-interested motivations for
corporate philanthropy identified in extant literature
(Brammer and Millington 2005, 2006; Campbell et al. 2002;
Saiia et al. 2003; Seifert et al. 2003; Zhang et al. 2010). Also,
environmental polluters will pursue corporate philanthropy
primarily for appearance, rather than for substance, to miti-
gate the negative impacts of their environmental misconduct.

123
358
Second, the finding that environmentally unfriendly
Chinese family-owned firms have higher levels of corpo-
rate philanthropy makes an important contribution to the
literature on CSR. Specifically, the finding implies that
different CSR dimensions may be inherently inconsistent
in the context of corporate philanthropy and environmental
responsibility in Chinese family-owned firms.14
Third, I find that political connections, as an informal
system in China, can influence corporate philanthropy and
negatively mediate the association between environmental
misconduct and corporate philanthropy. Specifically, I
explore the interaction effects between environmental
misconduct and political connections on corporate philan-
thropy and find that environmental misconduct and the
positive association between corporate philanthropy and
environmental misconduct is less pronounced for politically
connected family-owned firms than for their counterparts
(Fig. 1). This finding suggests that political connections can
shield environmental wrongdoers from penalties.
Finally, my findings have policy implications for
emerging markets like China where environmental deteri-
oration is increasingly alarming. Regulators should pay
close attention to whether environmentally unfriendly firms
use corporate philanthropy to mitigate negative influences
and escape punishment, especially for politically connected
firms. If those behaviors are allowed to persist, environ-
mentally unfriendly behavior cannot be controlled.
This study has several limitations that future research may
address. First, I focused mainly on whether environmental
wrongdoers use corporate philanthropy to erase their nega-
tive image, but I did not detail the potential link between
environmental misconduct and other CSR dimensions, such
as production safety and human relations, although I inclu-
ded them as control variables. Second, I conducted this study
in the context of Chinese family-owned firms to test the
hidden connections between environmental misconduct and
corporate philanthropy, so my results may not generalize to
other markets that have institutional and organizational dif-
ferences. Future research may examine the relationships
among different CSR dimensions and conduct the research in
different markets, including emerging and developed mar-
kets, to better understand the causality between environ-
mental misconduct and corporate philanthropy. Finally,
because of limited survey data, I could not include some
factors such as financial statements restatement (Koehn and
Ueng 2010) to isolate the influence of environmental mis-
conduct on corporate philanthropy. Thus, future studies
using empirical data can supplement my findings.15
14
Environmental misconduct (ENV_MIS) is the inverse proxy for
corporate environmental responsibility.
15
I acknowledge an astute referee who reminded me of this
limitation.
123
X. Du
In closing, motivated by Brammer et al. (2009) and
Heugens et al. (2008), future research should address an
unresolved ethical issue: whether corporate philanthropy
from environmental wrongdoers is totally good, totally
bad, or is rather a complex mixture of both.
Acknowledgments I am especially grateful to the editor (Professor
Laura Jane Spence) and two anonymous reviewers for their many
insightful suggestions and constructive comments. I also appreciate
constructive comments from Di Cai, Yingying Chang, Yingjie Du,
Wentao Feng, Wei Jian, Shaojuan Lai, Feng Liu, Jun Lu, Hongmei
Pei, Quan Zeng, and participants of my presentations at Xiamen
University, Anhui University, Anhui University of Technology,
Ocean University of China, Shandong University, and Shanghai
University. Especially, I must acknowledge my great thanks to Pro-
fessor Di Cai for his generous providing the survey data and Quan
Zeng for his excellent research assistance for this study, respectively.
I acknowledge financial support from the National Natural Science
Foundation of China (approval number: 71072053), the Key Project
of Key Research Institute of Humanities and Social Science in
Ministry of Education (approval number: 13JJD790027), the Spe-
cialized Research Fund for the Doctoral Program of Higher Education
of China (approval number: 20120121110007), and Xiamen Univer-
sity’s Prosperity Plan Project of Philosophy and Social Sciences
(subproject for Center for Accounting Studies and School of
Management).
Appendix
See Table 9.
Table 9 Variable definitions
Variable Definitions
Variables for main tests
GIVING The amount of corporate philanthropic giving
scaled by sales revenue(Chen et al. 2008)
ENV_MIS The proxy for environmental misconduct,
measured as the amount of fine (multiplied by
1,000) due to environmentally unfriendly
behavior scaled by sales revenue
POL_CON An indictor variable for political connections,
equaling 1 if the entrepreneur served as an
official in (central or local) governments before
he/she became the founder of a family-owned
firm and 0 otherwise (Fan et al. 2007)
PRO_QUA A dummy variable, equaling 1 if a family-owned
firm has been given one or more authoritative
verifications (e.g., ISO9000, CE, QS), which
are viewed as a link with higher product
quality, and 0 otherwise (Chen et al. 2008; Gao
et al. 2012)
EMPLOYEE Employees’ annual total salaries and bonus
scaled by sales revenue (Chen et al. 2008; Gao
et al. 2012)
GENDER An indictor variable, equaling 1 if a family-
owned firm’s entrepreneur is woman and 0
otherwise (Du et al. 2013; Wang and Coffey
1992)
Is Corporate Philanthropy Used as Environmental Misconduct Dressing?
Table 9 continued
Variable Definitions
EDU The ordered variable and an inverse proxy for
educational background of a family-owned
firm’s entrepreneur, measured as 1, 2, 3, 4, 5,
and 6 for postgraduate or above, bachelor,
college, senior high school, junior high school,
and primary school, respectively
AGE The age of a firm’s entrepreneur
DUAL An indicator variable, equaling 1 if a family-
owned firm’s entrepreneur serves as the CEO
and the chairman simultaneously and 0
otherwise
SGM An indicator variable, equaling 1 if a family-
owned firm has its SGM and 0 otherwise;
DBOARD An indicator variable, equaling 1 if a family-
owned firm has its DBOARD and 0 otherwise
(Du et al. 2013)
SBOARD An indicator variable, equaling 1 if a family-
owned firm has its SBOARD and 0 otherwise;
SIZE The natural log of sales revenue (Amato and
Amato 2007; Brammer and Millington 2006;
Du et al. 2013; Muller and Whiteman 2009;
Orlitzky 2001; Zhang et al. 2010)
LEV The amount of a family-owned firm’s bank loans
scaled by sales revenue (Adams and Hardwick
1998; Brammer and Millington 2005; Du et al.
2013)
ROS Net income scaled by sales revenue in the year
(Adams and Hardwick 1998; Crampton and
Patten 2008; Du et al. 2013; Galaskiewicz
1997; Useem 1988; Zhang et al. 2010)
FIRMAGE The number of years since a family-owned firm’s
foundation
GDP_PC GDP per capita (in thousand Chinese Yuan) at
the province level (Du et al. 2013)
Variables for robustness checks
ENV_MISDUM An indictor variable for environmental
misconduct, equaling 1 if a family-owned firm
was fined because of its environmentally
unfriendly behavior in 2007 and 0 otherwise
GIVING_ADJ Industry-mean-adjusted corporate philanthropic
giving
ENV_INV The instrument variable for ENV_MIS, measured
as a family-owned firm’s pollution control
expenditures scaled by sales revenue
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