Market Valuation of Corporate Charitable Donations

Over the past decade, Corporate Social Responsibility (CSR) has become a major concern for firms in appeasing the skepticism of stakeholder groups including shareholders, consumers, and organizational members at various levels (Donaldson and Preston, 1995; Kapstein, 2001). Significant changes have occurred in the way in which firms would like to be regarded, as evidenced by the increased reporting of charitable activities in annual reports. The literature on CSR has treated many issues such as the determinants thereof, within stakeholder (Roberts, 1992) and financial (Waddock and Graves, 1997) models. A recent UK study by Brammer and Millington (2004) focuses on the determinants of one aspect of CSR, charitable donations, rather than investigating a composite measure of CSR which bundles its different aspects (e.g. employee relations, environmental policy, etc.). Along the same focus on charitable donations, other angles addressed in the US and Canada include: the relationship between charitable giving and corporate governance (e.g. Bartkus et al., 2001; Coffey and Wang, 1998); the motivation behind the allocation of corporate donations among various categories of recipients (e.g. Leclair and Gordon, 2000); and the impact of tax changes on corporate charitable giving (e.g. Schwartz, 1968).