Corporate philanthropy in the US stock market: Evidence on corporate governance, value relevance and earnings manipulation

George Emmanuel Iatridis

International Review of Financial Analysis, 2015, vol. 39, issue C, 113-126

Abstract: This study examines the financial attributes of corporate philanthropy derived from the agency motives for corporate giving. Further, this study assesses the value relevance of corporate giving and investigates the impact of giving on investor perceptions and future profitability and growth. Also, it investigates the association between charitable spending and earnings manipulation. The findings indicate that the adoption of structured philanthropic initiatives and the use of in-kind contributions encourage corporate giving. Monitoring exercised by leverage and corporate governance affects corporate giving downwards. Firms that experience a management change are subject to more public scrutiny and tend to give more. Corporate giving is value relevant and is negatively related to analyst forecast error and positively to analyst coverage. Charitable firms tend to engage less in earnings manipulation. However, firms with significant growth options may direct slack resources to discretionary charitable causes. In-kind contributions are negatively related to managerial opportunism.

Keywords: Corporate giving; Leverage; Litigation; Agency costs; Corporate governance; Value relevance; Earnings manipulation (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:39:y:2015:i:c:p:113-126

DOI: 10.1016/j.irfa.2015.03.004

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