More and more firms have been engaged in targeted poverty alleviation since its implementation in 2013, which has become a new form of corporate social responsibility for listed firms in China. As the market entities pursuing the maximize profits, why are these firms so motivated to conduct targeted poverty alleviation?

With the use of listed firms from 2016 to 2018 in China as samples, this paper explores the impact of participation in targeted poverty alleviation and in different types of targeted poverty alleviation on financial constraints. Based on this, we analyze two mechanisms of the influence of participating in targeted poverty alleviation on financial constraints: resource effect and information effect. In addition, we also investigate the heterogeneous influence of the nature of ownership and the geographical location of firms on the relationship between targeted poverty alleviation and financial constraints.

The results show that: Firstly, the financial constraints of firms participating in targeted poverty alleviation are significantly reduced, which can be more clearly observed especially in the firms participating in industrial targeted poverty alleviation and in the form of bank-company cooperation compared with those participating in other types of targeted poverty alleviation. Secondly, no matter what type of targeted poverty alleviation is involved, firms have access to more economic resources（bank credit and government subsidies）, thereby relieving their financial constraints. However, firms engaged in different types of targeted poverty alleviation have different internal mechanisms for obtaining economic resources: for firms participating in industrial targeted poverty alleviation, information effect and resource effect exist simultaneously; there is only resource effect in firms involved in other types of targeted poverty alleviation. Finally, the impact of participation in targeted poverty alleviation on financial constraints varies among firms with different nature of ownership and geographical locations. Specifically, the impact is more significant on private companies and firms located in provinces with greater pressure of poverty alleviation.

The main contributions of this paper are as follows: Firstly, based on the new development of corporate social responsibility of Chinese firms, this paper distinguishes different characteristics of firms’ targeted poverty alleviation from traditional corporate philanthropy, which expands the research on corporate social responsibility, and reflects strong Chinese characteristics and social background. Secondly, it explores the internal mechanism of firms’ participation in targeted poverty alleviation from a micro perspective, thus enriching the literature on targeted poverty alleviation. Finally, the results show that firms’ participation in targeted poverty alleviation is not necessarily at the cost of efficiency loss. Firms involved in targeted poverty alleviation, especially through industrial targeted poverty alleviation, can realize the consistency between corporate interests and social welfare.