Does Corporate Philanthropy Increase Firm Value? The Moderating Role of Corporate Governance

Weichieh Su, Steve Sauerwald

Research output: Contribution to journalArticlepeer-review

13 Citations (Scopus)

Abstract

The link between corporate philanthropy and firm value has been controversial. On one hand, corporate philanthropy is often criticized as an agency cost because it may serve narrow managerial self-interests. On the other hand, corporate philanthropy may enhance firm value because it improves the relationships between firms and their stakeholders. In this study, we argue that this controversy is contingent upon whether corporate governance mechanisms can stimulate the financial benefit of corporate philanthropy. Based on a sample of U.S. firms from 1996 to 2003, we find that CEO long-term pay positively moderates the relationship between corporate philanthropy and firm value while multiboard outside directors negatively moderate this relationship. Contrary to our expectations, we find that the relationship between corporate philanthropy and firm value enhances as CEO tenure increases. Our findings show that corporate governance plays an important moderating role in the relationship between corporate philanthropy and firm value.

Original languageEnglish
Pages (from-to)599-635
Number of pages37
JournalBusiness and Society
Volume57
Issue number4
DOIs
Publication statusPublished - Apr 1 2018
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting (miscellaneous)
  • Social Sciences (miscellaneous)

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