Are Hedge Fund Managers’ Charitable Donations Strategic?

60 Pages Posted: 14 Dec 2015 Last revised: 11 Dec 2020

See all articles by Vikas Agarwal

Vikas Agarwal

Georgia State University; University of Cologne - Centre for Financial Research (CFR)

Yan Lu

University of Central Florida - College of Business Administration

Sugata Ray

University of Alabama - Department of Economics, Finance and Legal Studies

Date Written: April 12, 2018

Abstract

We study whether hedge funds make charitable donations to further their business interests. We find that donations are driven by poor fund flows and performance. Post-donation, donor funds experience lower outflows compared to matched non-donors. One-off donations and donations to charities which hold fundraising events catering to the hedge fund community are more likely to mitigate outflows after poor performance. These findings are consistent with strategic motivations driving at least some donations. While the economics of donations initially appear quite favorable to the hedge funds, the benefits from donations are not scalable. Moreover, investors punish donors through greater redemptions if poor performance persists post-donation.

Keywords: Hedge funds, Philanthropy, Trust, Charitable Donations, Capital Formation, Corporate Social Responsibility (CSR)

JEL Classification: D64, G23, G41

Suggested Citation

Agarwal, Vikas and Lu, Yan and Ray, Sugata, Are Hedge Fund Managers’ Charitable Donations Strategic? (April 12, 2018). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2703472 or http://dx.doi.org/10.2139/ssrn.2703472

Vikas Agarwal

Georgia State University ( email )

35 Broad Street,
Suite 1221
Atlanta, GA 30303-3083
United States
404-413-7326 (Phone)
404-413-7312 (Fax)

HOME PAGE: http://www.gsu.edu/~fncvaa

University of Cologne - Centre for Financial Research (CFR)

Albertus-Magnus Platz
Cologne, 50923
Germany

Yan Lu (Contact Author)

University of Central Florida - College of Business Administration ( email )

PO Box 161400
Orlando, FL 32816
United States

Sugata Ray

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States

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