Corporate philanthropy, reputation risk management and shareholder value: A study of Australian corporate giving

Hogarth, Kate, Hutchinson, Marion, & Scaife, Wendy (2016) Corporate philanthropy, reputation risk management and shareholder value: A study of Australian corporate giving. Journal of Business Ethics. (In Press)

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This study examines the role of corporate philanthropy in the management of reputation risk and shareholder value of the top 100 ASX listed Australian firms for the three years 2011-2013. The results of this study demonstrate the business case for corporate philanthropy and hence encourage corporate philanthropy by showing increasing firms’ investment in corporate giving as a percentage of profit before tax, increases the likelihood of an increase in shareholder value. However, the proviso is that firms must also manage their reputation risk at the same time. There is a negative association between corporate giving and shareholder value (Tobin’s Q) which is mitigated by firms’ management of reputation. The economic significance of this result is that for every cent in the dollar the firm spends on corporate giving, Tobin’s Q will decrease by 0.413%. In contrast, if the firm increase their reputation by 1 point then Tobin’s Q will increase by 0.267%. Consequently, the interaction of corporate giving and reputation risk management is positively associated with shareholder value. These results are robust while controlling for potential endogeneity and reverse causality. This paper assists both academics and practitioners by demonstrating that the benefits of corporate philanthropy extend beyond a gesture to improve reputation or an attempt to increase financial performance, to a direct collaboration between all the factors where the benefits far outweigh the costs.

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ID Code: 95467
Item Type: Journal Article
Refereed: Yes
Keywords: Corporate philanthropy, reputation risk management, shareholder value
DOI: 10.1007/s10551-016-3205-8
ISSN: 1573-0697
Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BUSINESS AND MANAGEMENT (150300)
Divisions: Current > Research Centres > Australian Centre for Philanthropy and Nonprofit Studies
Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Accountancy
Copyright Owner: Copyright 2016 Springer Netherlands
Copyright Statement: The final publication is available at Springer via[insert DOI]
Deposited On: 10 May 2016 23:41
Last Modified: 10 Jun 2016 21:09

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