IDEAS home Printed from https://ideas.repec.org/a/eee/pacfin/v66y2021ics0927538x1730392x.html
   My bibliography  Save this article

The value relevance of corporate donations

Author

Listed:
  • Houqe, Muhammad Nurul
  • van Zijl, Tony
  • Karim, A.K.M. Waresul
  • George, Thomas St

Abstract

This paper examines whether corporate donations, a form of CSR activity, have a positive impact on firm value. The impact of donations on value may suffer from agency problems or poor quality in the choice of donee. However, we expect that, on balance, donations would have a positive impact on value. We use a sample of 52,199 firm-year observations from 42 countries for the period 1998 to 2014 and conduct our tests using the Collins et al. (1999) adaptation of the Ohlson (1995) model. Our evidence supports our expectation that corporate donations have a positive impact on firm value. We also find that CSR performance, and the country level variables for culture and corruption, moderate the contribution to value. Our results are robust to several sensitivity tests including an alternative measure of donations, additional country-level control variables, and variation in the study sample.

Suggested Citation

  • Houqe, Muhammad Nurul & van Zijl, Tony & Karim, A.K.M. Waresul & George, Thomas St, 2021. "The value relevance of corporate donations," Pacific-Basin Finance Journal, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:pacfin:v:66:y:2021:i:c:s0927538x1730392x
    DOI: 10.1016/j.pacfin.2019.03.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927538X1730392X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.pacfin.2019.03.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
    2. Hao Liang & Luc Renneboog, 2017. "On the Foundations of Corporate Social Responsibility," Journal of Finance, American Finance Association, vol. 72(2), pages 853-910, April.
    3. Stefano DellaVigna & John A. List & Ulrike Malmendier, 2012. "Testing for Altruism and Social Pressure in Charitable Giving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 1-56.
    4. Hoje Jo & Maretno Harjoto, 2011. "Corporate Governance and Firm Value: The Impact of Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 103(3), pages 351-383, October.
    5. Barth, Mary E. & Beaver, William H. & Landsman, Wayne R., 2001. "The relevance of the value relevance literature for financial accounting standard setting: another view," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 77-104, September.
    6. Hanming Fang & Peter Norman, 2014. "Toward an efficiency rationale for the public provision of private goods," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(2), pages 375-408, June.
    7. Hao Liang & Luc Renneboog, 2017. "Corporate donations and shareholder value," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(2), pages 278-316.
    8. Dennis Patten, 2008. "Does the Market Value Corporate Philanthropy? Evidence from the Response to the 2004 Tsunami Relief Effort," Journal of Business Ethics, Springer, vol. 81(3), pages 599-607, September.
    9. Jennifer C. Chen & Dennis M. Patten & Robin Roberts, 2008. "Corporate Charitable Contributions: A Corporate Social Performance or Legitimacy Strategy?," Journal of Business Ethics, Springer, vol. 82(1), pages 131-144, September.
    10. Huynh, Kim P. & Petrunia, Robert J., 2010. "Age effects, leverage and firm growth," Journal of Economic Dynamics and Control, Elsevier, vol. 34(5), pages 1003-1013, May.
    11. Arthur Gautier & Anne-Claire Pache, 2015. "Research on Corporate Philanthropy: A Review and Assessment," Journal of Business Ethics, Springer, vol. 126(3), pages 343-369, February.
    12. repec:feb:framed:0087 is not listed on IDEAS
    13. Alan Muller & Gail Whiteman, 2009. "Exploring the Geography of Corporate Philanthropic Disaster Response: A Study of Fortune Global 500 Firms," Journal of Business Ethics, Springer, vol. 84(4), pages 589-603, February.
    14. Alan Muller & Gail Whiteman, 2009. "Exploring the Geography of Corporate Philanthropic Disaster Response: A Study of Fortune Global 500 Firms," Journal of Business Ethics, Springer, vol. 84(4), pages 605-605, February.
    15. Stefan Beiner & Wolfgang Drobetz & Markus M. Schmid & Heinz Zimmermann, 2006. "An Integrated Framework of Corporate Governance and Firm Valuation," European Financial Management, European Financial Management Association, vol. 12(2), pages 249-283, March.
    16. Hung, Mingyi, 2000. "Accounting standards and value relevance of financial statements: An international analysis," Journal of Accounting and Economics, Elsevier, vol. 30(3), pages 401-420, December.
    17. Ely, K & Waymire, G, 1999. "Accounting standard-setting organizations and earnings relevance: Longitudinal evidence from NYSE common stocks, 1927-93," Journal of Accounting Research, Wiley Blackwell, vol. 37(2), pages 293-317.
    18. Ailian Gan, 2006. "The Impact of Public Scrutiny on Corporate Philanthropy," Journal of Business Ethics, Springer, vol. 69(3), pages 217-236, December.
    19. Brown, William O. & Helland, Eric & Smith, Janet Kiholm, 2006. "Corporate philanthropic practices," Journal of Corporate Finance, Elsevier, vol. 12(5), pages 855-877, December.
    20. Francis, J & Schipper, K, 1999. "Have financial statements lost their relevance?," Journal of Accounting Research, Wiley Blackwell, vol. 37(2), pages 319-352.
    21. Azlan Bin Amran & Lim Lynn Ling & Yahya Sofri, 2007. "A Study of Corporate Philanthropic Traits among Major Malaysian Corporations," Social Responsibility Journal, Emerald Group Publishing Limited, vol. 3(4), pages 21-30, November.
    22. Mike Adams & Philip Hardwick, 1998. "An Analysis of Corporate Donations: United Kingdom Evidence," Journal of Management Studies, Wiley Blackwell, vol. 35(5), pages 641-654, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ruixi Long & Shuyang Jia, 2023. "Foreground or background my social responsibility: impact of the trade war on the readability of corporate social responsibility disclosures," Information Technology and Management, Springer, vol. 24(1), pages 79-97, March.
    2. Weibing Li & Siyuan Chen & Kaixia Zhang, 2023. "Responsible Behavior of Irresponsible Companies: Air Pollution and Charitable Donations of Polluting Companies," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(4), pages 90-119, July.
    3. Ye Chen & Naiding Yang, 2023. "Investor Responses to Corporate Donation Frequency Strategies: The Mediating Roles of Bidirectional Motive Attributions," Sustainability, MDPI, vol. 15(21), pages 1-19, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kentaro Azuma & Nicolas M. Dahan & Jonathan Doh, 2024. "Shareholder reaction to corporate philanthropy after a natural disaster: an empirical exploration of the “signaling financial prospects” explanation," Asia Pacific Journal of Management, Springer, vol. 41(3), pages 1421-1449, September.
    2. Hanwen Chen & Siyi Liu & Xin Liu & Daoguang Yang, 2022. "Adversity Tries Friends: A Multilevel Analysis of Corporate Philanthropic Response to the Local Spread of COVID-19 in China," Journal of Business Ethics, Springer, vol. 177(3), pages 585-612, May.
    3. Lei Xu & Xiaoning Guo & Yan Liu & Xiaochen Sun & Jie Ji, 2022. "How Does Corporate Charitable Giving Affect Enterprise Innovation? A Literature Review and Research Directions," Sustainability, MDPI, vol. 14(23), pages 1-21, November.
    4. Arthur Gautier & Anne-Claire Pache, 2015. "Research on Corporate Philanthropy: A Review and Assessment," Journal of Business Ethics, Springer, vol. 126(3), pages 343-369, February.
    5. Kellie Liket & Ana Simaens, 2015. "Battling the Devolution in the Research on Corporate Philanthropy," Journal of Business Ethics, Springer, vol. 126(2), pages 285-308, January.
    6. Jun Chen & Wang Dong & Jamie Tong & Feida Zhang, 2018. "Corporate Philanthropy and Tunneling: Evidence from China," Journal of Business Ethics, Springer, vol. 150(1), pages 135-157, June.
    7. Frederik Plewnia & Edeltraud Guenther, 2017. "The benefits of doing good: a meta-analysis of corporate philanthropy business outcomes and its implications for management control," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 28(3), pages 347-376, October.
    8. Lin Zhang & Yuehua Xu & Honghui Chen, 2022. "Do Returnee Executives Value Corporate Philanthropy? Evidence from China," Journal of Business Ethics, Springer, vol. 179(2), pages 411-430, August.
    9. Zhang, Min & Tong, Lijing & Su, Jun & Cui, Zhipeng, 2015. "Analyst coverage and corporate social performance: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 32(C), pages 76-94.
    10. Jochen Theis & Marvin Nipper & Marco Meier, 2024. "The influence of corporate philanthropic donations on private investors' valuation judgments: Experimental evidence," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(1), pages 540-554, January.
    11. Lin, Karen Jingrong & Tan, Jinsong & Zhao, Liming & Karim, Khondkar, 2015. "In the name of charity: Political connections and strategic corporate social responsibility in a transition economy," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 327-346.
    12. Huang, Ruixian & Shi, Yujing & Li, Danyang & Wang, Shuoxiang & Jia, Zhehao, 2024. "Religious atmosphere, seismic impact, and corporate charitable donations in China," Energy Economics, Elsevier, vol. 131(C).
    13. Chourou, Lamia, 2023. "Corporate donations and religiosity: Cross-country evidence," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).
    14. María Lourdes Arco-Castro & María Victoria Lopez-Pérez & Sara Rodriguez-Gomez & Raquel Garde-Sánchez, 2020. "Do Stakeholders Modulate Philanthropic Strategy? Corporate Philanthropy as Stakeholders’ Engagement," Sustainability, MDPI, vol. 12(18), pages 1-18, September.
    15. Min Zhang & Lu Xie & Haoran Xu, 2016. "Corporate Philanthropy and Stock Price Crash Risk: Evidence from China," Journal of Business Ethics, Springer, vol. 139(3), pages 595-617, December.
    16. Yongqiang Gao & Haibin Yang & Taïeb Hafsi, 2019. "Corporate giving and corporate financial performance: the S-curve relationship," Asia Pacific Journal of Management, Springer, vol. 36(3), pages 687-713, September.
    17. Gianecchini, Martina, 2020. "Strategies and determinants of corporate support to the arts: Insights from the Italian context," European Management Journal, Elsevier, vol. 38(2), pages 308-318.
    18. Cowan, Adrian & Huang, Chia-Hsing & Padmanabhan, Prasad, 2016. "Why do some US manufacturing and service firms with international operations choose to give internationally whereas others opt to give only in the United States?," International Business Review, Elsevier, vol. 25(1), pages 408-418.
    19. Cowan, Adrian & Huang, Chia-Hsing & Padmanabhan, Prasad & Wang, Chi-Hui, 2013. "The determinants of foreign giving: An exploratory empirical investigation of US manufacturing firms," International Business Review, Elsevier, vol. 22(2), pages 407-420.
    20. Byungki Kim & Jinhan Pae & Choong-Yuel Yoo, 2019. "Business Groups and Tunneling: Evidence from Corporate Charitable Contributions by Korean Companies," Journal of Business Ethics, Springer, vol. 154(3), pages 643-666, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pacfin:v:66:y:2021:i:c:s0927538x1730392x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/pacfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.