Value-Enhancing Social Responsibility: Market Reaction to Donations by Family vs. Non-family Firms with Religious CEOs
Using a signaling framework, we argue that ethical behavior as evidenced by charitable donations is viewed more positively by investors when seen not to be based on self-serving motives but rather on authentic generosity that builds moral capital. The affirmed religiosity of CEOs may make their ethical position more credible, while their embeddedness within a family business suggests that CEOs are backed by powerful owners with long-time horizons and a desire to build moral capital with stakeholders. We find in a study of market responses to 1572 corporate donations by S&P 1500 firms that financial markets react more positively to charitable initiatives from firms with religion-declared CEOs, but only if these are family businesses.
Journal of Business Ethics
Maung, Min; Miller, Danny; Tang, Zhenyang; and Xu, Xiaowei, "Value-Enhancing Social Responsibility: Market Reaction to Donations by Family vs. Non-family Firms with Religious CEOs" (2020). School of Management. 156.