The Value of Corporate Philanthropy During Times of Crisis: The Sensegiving Effect of Employee Involvement

38 Pages Posted: 6 Apr 2011 Last revised: 9 Mar 2013

See all articles by Alan Muller

Alan Muller

University of Amsterdam Business School; University of Washington - Michael G. Foster School of Business

Roman Kräussl

Luxembourg School of Finance; Hoover Institution, Stanford University

Date Written: April 5, 2011

Abstract

Recent research suggests that philanthropy’s value to the firm is largely mediated by contextual factors such as managers’ assumed motives for charity. Our paper extends this contingency perspective using a 'sensegiving' lens, by which external actors’ interpretations of organizational actions may be influenced by the way in which the organization communicates about those actions. We consider how sensegiving features in philanthropy-related press releases affect whether investors value those donation decisions. For our empirical investigation we analyze abnormal returns to announcements by U.S. Fortune 500 firms documenting their donations to Hurricane Katrina disaster relief in 2005. We expect that in general, donation decisions would be controversial given the uncertainty surrounding the hurricane’s economic effects at the time. However, we also propose that announcements emphasizing employee involvement in the donation send investors positive signals about the firm’s ability to bounce back from the disaster’s adverse effects. We find empirical support for our hypotheses, and discuss implications for theory and practice.

Keywords: corporate philanthropy, employee involvement, firm value, Hurricane Katrina, sensegiving

Suggested Citation

Muller, Alan R. and Kraeussl, Roman, The Value of Corporate Philanthropy During Times of Crisis: The Sensegiving Effect of Employee Involvement (April 5, 2011). Journal of Business Ethics, Vol. 103, No. 2, 2011. Available at SSRN: https://ssrn.com/abstract=1803474 or http://dx.doi.org/10.2139/ssrn.1803474

Alan R. Muller (Contact Author)

University of Amsterdam Business School ( email )

Plantage Muidergracht 12
Amsterdam, 1018TV
Netherlands

HOME PAGE: http://www1.fee.uva.nl/pp/amuller

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Roman Kraeussl

Luxembourg School of Finance ( email )

4, rue Albert Borschette
Luxembourg, 1246
Luxembourg
+3524666445442 (Phone)

HOME PAGE: http://www.art-finance.com

Hoover Institution, Stanford University ( email )

Stanford, CA 94305
United States

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