Peer hypocrisy and corporate philanthropic giving

Purpose This paper aims to examine whether the prevalence of peer hypocrisy among industry counterparts is associated with reduced corporate philanthropic giving by focal firms and explore the pathways through which this association arises. Design/methodology/approach Using a panel of Chinese A-share listed firms from 2013 to 2023, the study uses fixed-effects regression supplemented by instrumental variable estimation, propensity score matching, system GMM and placebo tests. It also examines how the association varies with violation severity and with the surrounding information environment. Findings Higher levels of peer hypocrisy are associated with lower focal firm donations, with a one-standard-deviation rise in industry hypocrisy corresponding to a fall of around 20.4% in donations relative to the sample mean. The association appears to work primarily through deterioration of the informational environment that supports the signaling value of charitable donations and secondarily through tighter profit margins and tighter financing conditions. It is more pronounced when peer hypocrisy involves severe penalties or fraud-type violations and weaker where the information environment is stronger. Analyst following and press coverage are themselves thinner in industries where peer hypocrisy is more prevalent, so that the external scrutiny capable of restoring the philanthropic signal recedes where it would be most useful. Originality/value This paper documents that the coexistence of philanthropy and misconduct among industry peers represents a distinct externality, one that weakens the signaling value of charitable donations and accompanies lower philanthropic giving among responsible firms.