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Economic policy uncertainty and corporate donation: evidence from private firms in Korea

Author

Listed:
  • Hongmin Chun

    (Sungshin Women’s University)

  • Maretno Harjoto

    (Pepperdine University)

  • Hakjoon Song

    (California State University Dominguez Hills)

Abstract

This study examines the association between economic policy uncertainty (EPU) and private firms’ corporate donations. Based on resource constraints and the conservation of resources (COR) theory, we argue that private firms are constantly facing resource constraints and their resource conservation motive becomes apparent when EPU is heightened. Therefore, we expect that corporate donations are negatively related to EPU. Using audited corporate donations from 48,903 private firms in Korea during 2002–2019, we find that private firms’ donations are negatively related to EPU. We find that private firms operating in more competitive conditions increase their donations, but this positive association between market competition and donations is moderated by EPU. We find that private firms’ donations increased when the progressive party is in power, but this positive relationship is also moderated by EPU. Our results suggest that firms reduce their level of corporate giving to conserve resources as a precautionary saving motive when they face higher EPU. Our paper contributes to the strand of literature on corporate donations and EPU by providing evidence that EPU significantly affects private firms’ donations. We also find that firms’ strategic motives and political pressure to engage in corporate donations are moderated by EPU.

Suggested Citation

  • Hongmin Chun & Maretno Harjoto & Hakjoon Song, 2023. "Economic policy uncertainty and corporate donation: evidence from private firms in Korea," Review of Managerial Science, Springer, vol. 17(3), pages 909-939, April.
    • Handle: RePEc:spr:rvmgts:v:17:y:2023:i:3:d:10.1007_s11846-022-00550-8
    DOI: 10.1007/s11846-022-00550-8
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    More about this item

    Keywords

    Economic policy uncertainty; Corporate donations; Private firms; Resource constraints; Market competition; Progressive party;
    All these keywords.

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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