Does corporate giving following natural disasters increase firm value?
With Dr Cara Vansteenkiste, School of Banking & Finance, UNSW Business School
Corporate philanthropy is generally considered to be inconsistent with shareholder wealth maximisation. Nevertheless, Australian corporations donated close to $100 million in disaster relief following the bushfire crisis in 2019.
What motivates firms to engage in corporate giving, and what are the implications for shareholder value? Investigating market responses to corporate disaster-relief giving, we find that the strategic benefits of donating increase with disaster saliency and with the importance of reputation and social image to the firm. Although disaster-relief giving is on average associated with negative stock returns, we document a strategic philanthropy effect that increases firm value if the strategic benefits of donating are sufficiently large.
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