Analysis Of Charitable Donation’s Influence To Enterprise Value

Charitable donation is a concept which people often confuse with corporate social responsibility, however, although charitable donations is belong to the high level social responsibility behavior, but because of its simple, direct, and non-continuous, charitable donations can not represent good CSR condition. A company with good social performance and another company with bad social performance are both likely to have charitable donations. For this two types of enterprises, this paper compares the market response of enterprise value to their charitable donations, and attempt to provide advice to company when they face the choices in short-term charitable donations and long-term strategic CSR.April20,2013, Sichuan Ya’an happened earthquakes again, and attract the attention of whole country. After the earthquake, many of firms take a quick action to donate to the disaster area. This paper focuses on the charitable donation’s effect on enterprise value. We pay attention to the stock data of which have taken charitable donation after Ya’an earthquake. In order to simplify our analysis, this paper only considers the companies who are listed in Shanghai and Shenzhen stock market. We separate these companies into two groups: one has good social performance, and the other has bad social performance. We compare the market response of charitable donations by the two different groups, and try to give suggest to companies when they face choices of CSR strategic. We also analyze other elements’effect to cumulative abnormal returns and the willingness to donate, such as company’s scale, sales model, ownership featureIn this paper, we find that charitable donations have a significant positive effect on the enterprise value, while the social performance actors can enhance the effect of charitable donations to enterprise value. Corporate has good social performance, can obtain more from charitable donations than corporate has bad social performance. We also find out that the company’s scale, sales model, ownership feature are closely related to their corporate donation wishes. Enterprises who have large scale, directly sale production to consumer, and state-controlled donate more than ordinary company. Through theoretical and empirical analysis, this paper obtains result that long-term CSR strategic is better than short-term charitable donations. So, companies should draw up long-term and diversified CSR strategy. For those companies who have "scandal", it is better to increase lasting investment of CSR to reduce the "scandal", rather than give large charitable donation to restore the public image of firm.