Is Doing Good Good for You? How Corporate Charitable Contributions Enhance Revenue Growth

40 Pages Posted: 27 Jul 2006 Last revised: 26 Jan 2009

Baruch Lev

New York University - Stern School of Business

Christine Petrovits

College of William and Mary - Mason School of Business

Suresh Radhakrishnan

University of Texas at Dallas - School of Management

Date Written: September 1, 2008

Abstract

This study examines the impact of corporate philanthropy growth on sales growth using a large sample of charitable contributions made by U.S. public companies from 1989 through 2000. Applying Granger causality tests, we find that charitable contributions are significantly associated with future revenue, whereas the association between revenue and future contributions is marginally significant at best. We then identify the mechanism underlying our findings. Our results are particularly pronounced for firms that are highly sensitive to consumer perception, where individual consumers are the predominant customers. In addition, we document a positive relationship between contributions and customer satisfaction. Overall, our evidence suggests that corporate philanthropy, under certain circumstances, furthers firms' economic objectives.

Keywords: corporate philanthropy, revenue growth, customer satisfaction, social responsibility, causality tests

JEL Classification: M14, M40, M48, L31

Suggested Citation

Lev, Baruch and Petrovits, Christine and Radhakrishnan , Suresh, Is Doing Good Good for You? How Corporate Charitable Contributions Enhance Revenue Growth (September 1, 2008). Available at SSRN: https://ssrn.com/abstract=920502

Baruch Itamar Lev

New York University - Stern School of Business ( email )

40 West 4th Street, Suite 400
New York, NY 10012
United States
212-998-0028 (Phone)
212-995-4001 (Fax)

HOME PAGE: http://www.baruch-lev.com

Christine Petrovits (Contact Author)

College of William and Mary - Mason School of Business ( email )

P.O. Box 8795
Williamsburg, VA 23187-8795
United States

Suresh Radhakrishnan

University of Texas at Dallas - School of Management ( email )

2601 North Floyd Road
Richardson, TX 75083-0688
United States
972-883-4438 (Phone)
972-883-6811 (Fax)

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