On the evaluation of corporate contributions

Gerald Keim, Roger Meiners and Louis Frey

Public Choice, 1980, vol. 35, issue 2, 129-136

Abstract: L-S conclude by stating that their ... tests of three hypotheses reveal a number of interesting relationships: Corporations' philanthropy depends upon their sizes, incomes, and especially their levels of advertising. Moreover, aggregate giving by corporations is affected by the government through tax policy and is related closely to dividends paid to stockholders. Finally, the current data do not disprove Williamson's hypothesis that contributions may be a preferred expense or emolument to the managers (p. 27). In fact, the relationships most frequently investigated in the corporate contributions literature have giving as a function of corporate size usually measured in terms of income, and giving as a function of the corporate tax rate or the cost of giving. Johnson, Schwartz, and Whitehead (1976) in a later study, reported evidence indicating a positive and significant relationship between contributions and various measures of corporate income. There is some question as to whether very small and large firms, when grouped by asset class, give relatively less than other firms. The analysis by L-S adds little to the literature on this issue. The inverse relationship between price and giving is also clearly demonstrated in the existing literature. Differences do exist, however, in price elasticity estimates between Schwartz and Nelson's work. L-S do not attempt to obtain price elasticity measures. The finding that advertising and giving are positively correlated was demonstrated in earlier work by Schwartz and Whitehead. Finally, the third test constructed by L-S does not bear on the expense preference notion as developed by Williamson. Thus, it is our conclusion that the paper by L-S adds little to the existing literature on corporate contributions. It conveys the impression that there exists no other empirical work in this area. This is an important area for further study. We hope our comments provide a more complete picture of the state of the art, and will stimulate further research. Copyright Martinus Nijhoff Publishers bv 1980

Date: 1980
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DOI: 10.1007/BF00140837

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