 Disaster Relief, Inc.: when is corporate philanthropy good or bad for shareholders?Hao Liang and Cara Vansteenkiste Review of Finance, 2025, vol. 29, issue 3, 851-886 Abstract: A long-standing question in finance is why companies donate to charity, often attributing it to either managerial agency problems or strategic behavior. Based on a global sample of donation announcements by firms providing relief to disaster-affected communities, we test the relative importance of these two motives and the conditions under which each dominates. We exploit disaster-specific factors in an event study setting around corporate donation announcement dates to show that, on average, relief donations decrease returns. However, the strategic benefits of donating around salient events can mitigate these negative effects. To account for firms’ donation decisions, we rely on exogenous variation in the availability of corporate charitable funds due to the timing of disasters relative to firms’ financial years. We show that donations provide new information to the market and that negative returns are primarily driven by cash donations made via corporate foundations. Keywords: natural disasters; corporate philanthropy; shareholder value; strategic benefits; agency costs (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:revfin:v:29:y:2025:i:3:p:851-886. Ordering information: This journal article can be ordered from Access Statistics for this article Review of Finance is currently edited by Marcin Kacperczyk More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC. |
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