Voting with Their Mouths and Corporate Philanthropy: Evidence from Sentiment Analysis of China's Stock Message Boards

This paper investigates whether and how negative sentiment expressed by investors, especially minority shareholders, on the EastMoney stock message boards affects corporate philanthropy. Moreover, it illustrates the governance mechanism of minority shareholders ‘voting with their mouths’. Using a sample of Chinese firms listed from 2008 to 2020, we find that negative sentiment from online postings inhibits corporate donations. We identify the underlying mechanism: through social media, minority shareholders voting with their mouths alleviates Type II agency problems by reducing excess donations rather than by affecting expected donations. In addition, we show that the effect is more pronounced among firms with high media attention, weak corporate governance, and less political capital. Overall, our findings broaden understanding of Type II agency problems in corporate philanthropy.