Will Company’s Social Donation Impact it’s Stock Performance? Evidence from China

With increasing market attention to corporate Environment, Social and Governance (ESG) practice. Corporate social donation plays an important part in a firm’s stock performance. Through regression analysis, this study aims to determine the relationship between corporate social donation surprise and a firm’s abnormal stock return in the next few periods. I analyzed 484 Chinese public companies from A and B shares and obtained the social donation amount from 2010-2020. The results show a positive and significant relationship between corporate social donation surprise and the firm’s abnormal stock return in the next two years. The analysis also indicates corporate social donation’s impact is stronger after COVID-19. For robustness checks, the study utilizes reverse causality analysis and nonlinear regression. I find that there is little possibility of a reverse impact from the company’s abnormal stock return. In addition, the result suggests the impact of corporate social donation appears to be an inverse U-shape. I also examine the different impacts on different market conditions. The findings of this study provide evidence for previous literature and guidance for proper corporate social donations.