Agency problems of corporate philanthropy
Masulis, Ronald W. & Reza, Syed Walid (2015) Agency problems of corporate philanthropy. Review of Financial Studies, 28(2), pp. 592-636.
Evaluating agency theory and optimal contracting theory views of corporate philanthropy, we find that as corporate giving increases, shareholders reduce their valuation of firm cash holdings. Dividend increases following the 2003 Tax Reform Act are associated with reduced corporate giving. Using a natural experiment, we find that corporate giving is positively (negatively) associated with CEO charity preferences (CEO shareholdings and corporate governance quality). Evidence from CEO-affiliated charity donations, market reactions to insider-affiliated donations, its relation to CEO compensation, and firm contributions to director-affiliated charities indicates that corporate donations advance CEO interests and suggests misuses of corporate resources that reduce firm value.
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|Item Type:||Journal Article|
|Divisions:||Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
|Copyright Owner:||Copyright 2014 The Author.|
|Copyright Statement:||Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: firstname.lastname@example.org.|
|Deposited On:||27 Nov 2014 02:08|
|Last Modified:||14 Dec 2015 04:02|
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