Good Deeds Done in Silence: Legitimacy Management, Stakeholder Saliency, and Silent Giving by Chinese Firms



The existing literature generally argues for a positive effect of corporate philanthropy on firm image and reputation. This is at odds with the observation that some firms engage in philanthropic activities but choose to keep silent about it. Building on and extending the stakeholder management and legitimacy literatures, we develop the argument that concerns about negative reactions from stakeholders may cause firms to keep silent about their philanthropic acts. In particular, we distinguish different stakeholder groups and argue that negative reactions to corporate philanthropy, which are targeted toward community stakeholders, are likely to arise from primary non-community stakeholders when their legitimate claims from the firm are not met. Conversely, positive perceptions of philanthropy are likely to arise from the same community stakeholders as philanthropy help mitigates their existing concerns. Using a panel of listed Chinese firms , we show that a firm is more likely to remain silent about philanthropy when its employees are underpaid and investors are not paid dividends. On the other hand, when the same community stakeholders were mistreated (e.g., the firm engaged in environmental pollution), the firm is less likely to keep silent about its donations.