Are hedge funds' charitable donations strategic?

Vikas Agarwal, Yan Lu and Sugata Ray

No 20-14, CFR Working Papers from University of Cologne, Centre for Financial Research (CFR)

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: 2020
New Economics Papers: this item is included in nep-fmk and nep-soc
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfrwps:2014

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