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Is Doing Good Good for You? Yes, Charitable Contributions Enhance Revenue Growth

Authors: Lev, Baruch
Petrovits, Christine
Radhakrishnan, Suresh
Issue Date: Jul-2006
Series/Report no.: Christine Petrovits-01
Abstract: A key question concerning socially responsible corporate activities is whether such actions achieve traditional goals, such as profit maximization and shareholder value creation, or whether such activities represent a drain on resources by opportunistic managers. Much of the debate about the legitimacy of and justification for socially responsible activities would be settled if it is convincingly shown that they further traditional business goals. In this study we provide such evidence. Using a large sample of charitable contributions made by public companies from 1989 through 2000, and a statistical methodology that distinguishes causation from association, we document that charitable contributions enhance the future revenue growth of the donors. In particular, we find evidence that, for firms in industries that are highly sensitive to consumer perception, corporate giving is associated with subsequent sales growth. On the other hand, our results do not provide strong evidence that revenue growth drives future charitable giving.
Appears in Collections:Accounting Working Papers

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