Are hedge funds' charitable donations strategic?

Vikas Agarwal, Yan Lu and Sugata Ray

Journal of Corporate Finance, 2021, vol. 66, issue C

Abstract: We study whether hedge funds make charitable donations to further their business interests. We find that donations are driven by poor fund flows and performance. Post-donation, donor funds experience lower outflows compared to matched non-donors. One-off donations and donations to charities which hold fundraising events catering to the hedge fund community are more likely to mitigate outflows after poor performance. These findings are consistent with strategic motivations driving at least some donations. While the economics of donations initially appear quite favorable to the hedge funds, the benefits from donations are not scalable. Moreover, investors punish donors through greater redemptions if poor performance persists post-donation.

Keywords: Hedge funds; Philanthropy; Trust; Charitable donations; Capital formation; Corporate social responsibility (CSR) (search for similar items in EconPapers)
JEL-codes: D64 G23 G41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:66:y:2021:i:c:s0929119920302868

DOI: 10.1016/j.jcorpfin.2020.101842

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