Financial conservatism and corporate social donations: evidence from zero corporate loans

This study examines the relationship between zero corporate loans and firms’ social donations. First, we find that firms with zero corporate loans engage in more social donation activities. Next, we find that the positive relationship between zero corporate loans and corporate social donations is weaker among higher-risk firms. These empirical findings can help stakeholders better understand a firm’s social donation behaviours in light of zero outstanding loans (both short- and long-term) in its capital structure. This study extends the literature by clarifying how an extreme corporate financial policy affects firms’ decisions related to social donation activities.