The impact of investor reaction to crisis events on corporate philanthropy: evidence from Chinese firms

This study examines the impact of investor reaction to crisis events on corporate philanthropy in China. Building on impression management theory, we propose that after suffering negative reactions from investors at the onset of a corporate crisis, firms tend to increase their post-crisis philanthropic giving to rebuild their reputation. Analyzing 149 corporate crises in 2008–2018 befalling publicly listed firms in China, our findings reveal that the subsequent increase of corporate philanthropic giving is adversely connected to crisis-related abnormal returns, suggesting that the severity of investor reaction at the onset of a crisis has a favorable impact on corporate philanthropy. Moreover, the negative relationship between philanthropic giving and crisis-related abnormal returns is more pronounced for firms with a higher demand for reputation repair. Our impression management perspective offers new insights into why firms engage in corporate philanthropy after suffering adverse reactions from investors at the onset of a corporate crisis.