Skip to main content
SpringerLink
Log in

Value-Enhancing Social Responsibility: Market Reaction to Donations by Family vs. Non-family Firms with Religious CEOs

  • Original Paper
  • Published:
Journal of Business Ethics Aims and scope Submit manuscript

Abstract

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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. According to Rokeach (1973, p. 5), “Values are generalized, enduring beliefs about the personal and social desirability of certain modes of conduct or end-states of existence.”

  2. As a robustness check we removed all donations by corporate foundations and reran our analyses on the smaller sample. Our results remained robust.

  3. Anderson et al. (2012) report an average family ownership of 25.5% in their sample, using the 5% cutoff.

  4. Very few studies directly investigate charitable donations by family firms and we are not aware of any study that investigates donations by S&P 1500 family firms. Dyer and Whetten (2006) is the only paper that uses the U.S. data for large corporations (S&P 500). Our study both extends the sample of firms and the number of years.

  5. We also have 41 cases with Hindu beliefs, but those CEOs are exclusively from non-family firms and hence cannot be analyzed separately.

References

  • Amato, L. H., & Amato, C. H. (2007). The effects of firm size and industry on corporate giving. Journal of Business Ethics,72(3), 229–241.

    Google Scholar 

  • Anderson, R. C., Duru, A., & Reeb, D. M. (2009). Founders, heirs, and corporate opacity in the United States. Journal of Financial Economics,92(2), 205–222.

    Google Scholar 

  • Anderson, R. C., & Reeb, D. M. (2003). Founding-family ownership and firm performance: Evidence from the S&P 500. The Journal of Finance,58(3), 1301–1328.

    Google Scholar 

  • Anderson, R. C., Reeb, D. M., & Zhao, W. (2012). Family-controlled firms and informed trading: Evidence from short sales. The Journal of Finance,67(1), 351–385.

    Google Scholar 

  • Arregle, J. L., Hitt, M. A., Sirmon, D. G., & Very, P. (2007). The development of organizational social capital: Attributes of family firms. Journal of Management Studies,44(1), 73–95.

    Google Scholar 

  • Astrachan, J. H., Klein, S. B., & Smyrnios, K. X. (2002). The F-PEC scale of family influence: A proposal for solving the family business definition problem1. Family Business Review,15(1), 45–58.

    Google Scholar 

  • Balog, A. M., Baker, L. T., & Walker, A. G. (2014). Religiosity and spirituality in entrepreneurship: A review and research agenda. Journal of Management, Spirituality & Religion,11(2), 159–186.

    Google Scholar 

  • Beckhard, R., & Dyer, W. G., Jr. (1983). Managing continuity in the family-owned business. Organizational Dynamics,12(1), 5–12.

    Google Scholar 

  • Bernile, G., Bhagwat, V., & Rau, P. R. (2017). What doesn’t kill you will only make you more risk-loving: Early-life disasters and CEO behavior. The Journal of Finance,72(1), 167–206.

    Google Scholar 

  • Berrone, P., Cruz, C., Gomez-Mejia, L. R., & Larraza-Kintana, M. (2010). Socioemotional wealth and corporate responses to institutional pressures: Do family-controlled firms pollute less? Administrative Science Quarterly,55(1), 82–113.

    Google Scholar 

  • Boatsman, J. R., & Gupta, S. (1996). Taxes and corporate charity: Empirical evidence from microlevel panel data. National Tax Journal,49, 193–213.

    Google Scholar 

  • Brooks, A. C. (2004). Faith, secularism and charity. Faith & Economics,43(Spring), 1–8.

    Google Scholar 

  • Brown, W. O., Helland, E., & Smith, J. K. (2006). Corporate philanthropic practices. Journal of Corporate Finance,12(5), 855–877.

    Google Scholar 

  • Campbell, J. L. (2007). Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Academy of Management Review,32(3), 946–967.

    Google Scholar 

  • Certo, S. T. (2003). Signaling with board structures. Academy of Management Review,28, 432–446.

    Google Scholar 

  • Chiu, S. C., & Sharfman, M. (2011). Legitimacy, visibility, and the antecedents of corporate social performance: An investigation of the instrumental perspective. Journal of Management,37(6), 1558–1585.

    Google Scholar 

  • Chrisman, J. J., Chua, J. H., & Sharma, P. (1998). Important attributes of successors in family businesses: An exploratory study. Family Business Review,11(1), 19–34.

    Google Scholar 

  • Connelly, B. L., Certo, S. T., Ireland, R. D., & Reutzel, C. R. (2011). Signaling theory: A review and assessment. Journal of Management,37, 39–67.

    Google Scholar 

  • Crampton, W., & Patten, D. (2008). Social responsiveness, profitability and catastrophic events: Evidence on the corporate philanthropic response to 9/11. Journal of Business Ethics,81(4), 863–873.

    Google Scholar 

  • Crimm, N. J. (2008). Muslim-Americans’ Charitable Giving Dilemma: What about a centralized terror-free donor advised fund? Roger Williams University Law Review. http://docs.rwu.edu/rwu_LR/vol13/iss2/3.

  • Mazereeuw-van der Duijn Schouten, C., Graafland, J., & Kaptein, M. (2014). Religiosity, CSR attitudes, and CSR behavior: An empirical study of executives’ religiosity and CSR. Journal of Business Ethics,123(3), 437–459.

    Google Scholar 

  • Dou, J., Zhang, Z., & Su, E. (2014). Does family involvement make firms donate more? Empirical evidence from Chinese private firms. Family Business Review,27(3), 259–274.

    Google Scholar 

  • Du, S., Bhattacharya, C. B., & Sen, S. (2010). Maximizing business returns to corporate social responsibility (CSR): The role of CSR communication. International Journal of Management Reviews,12(1), 8–19.

    Google Scholar 

  • Dyer, W. G., Jr., & Whetten, D. A. (2006). Family firms and social responsibility: Preliminary evidence from the S&P 500. Entrepreneurship Theory and Practice,30(6), 785–802.

    Google Scholar 

  • Dyreng, S. D., Mayew, W. J., & Williams, C. D. (2012). Religious social norms and corporate financial reporting. Journal of Business Finance & Accounting,39(7–8), 845–875.

    Google Scholar 

  • Edmans, A. (2011). Does the stock market fully value intangibles? Employee satisfaction and equity prices. Journal of Financial Economics,101(3), 621–640.

    Google Scholar 

  • Elitzur, R., & Gavious, A. (2003). Contracting, signaling, and moral hazard: A model of entrepreneurs, “angels”, and venture capitalists. Journal of Business Venturing,18, 709–725.

    Google Scholar 

  • Fama, E. F., Fisher, L., Jensen, M. C., & Roll, R. (1969). The adjustment of stock prices to new information. International Economic Review,10(1), 1–21.

    Google Scholar 

  • Fama, E. F., & French, K. R. (1992). The cross-section of expected stock returns. Journal of Finance,47(2), 427–465.

    Google Scholar 

  • Fama, E. F., & French, K. R. (2001). Disappearing dividends: Changing firm characteristics or lower propensity to pay? Journal of Financial Economics,60(1), 3–43.

    Google Scholar 

  • Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. The Journal of Law and Economics,26(2), 301–325.

    Google Scholar 

  • Flammer, C., & Bansal, P. (2017). Does a long-term orientation create value? Evidence from a regression discontinuity. Strategic Management Journal,38(9), 1827–1847.

    Google Scholar 

  • Godfrey, P. C. (2005). The relationship between corporate philanthropy and shareholder wealth: A risk management perspective. Academy of Management Review,30(4), 777–798.

    Google Scholar 

  • Godfrey, P. C., Merrill, C. B., & Hansen, J. M. (2009). The relationship between corporate social responsibility and shareholder value: An empirical test of the risk management hypothesis. Strategic Management Journal,30(4), 425–445.

    Google Scholar 

  • Gómez-Mejía, L. R., Haynes, K. T., Núñez-Nickel, M., Jacobson, K. J., & Moyano-Fuentes, J. (2007). Socioemotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills. Administrative Science Quarterly,52(1), 106–137.

    Google Scholar 

  • Gomulya, D., & Boeker, W. (2014). How firms respond to financial restatement: CEO successors and external reactions. Academy of Management Journal,57, 1759–1785.

    Google Scholar 

  • Goss, A., & Roberts, G. S. (2011). The impact of corporate social responsibility on the cost of bank loans. Journal of Banking & Finance,35(7), 1794–1810.

    Google Scholar 

  • Grullon, G., Kanatas, G., & Weston, J. (2010). Religion and corporate (mis) behavior. Working paper, Rice University.

  • Guiso, L., Sapienza, P., & Zingales, L. (2006). Does culture affect economic outcomes? Journal of Economic perspectives,20(2), 23–48.

    Google Scholar 

  • Guo, C., Webb, N. J., Abzug, R., & Peck, L. R. (2013). Religious affiliation, religious attendance, and participation in social change organizations. Nonprofit and Voluntary Sector Quarterly,42(1), 34–58.

    Google Scholar 

  • Harjoto, M. A., & Rossi, F. (2018). Religiosity, female directors, and corporate social responsibility for Italian listed companies. Journal of Business Research,95, 338–346.

    Google Scholar 

  • Hilary, G., & Hui, K. W. (2009). Does religion matter in corporate decision making in America? Journal of Financial Economics,93(3), 455–473.

    Google Scholar 

  • Homburg, C., Stierl, M., & Bornemann, T. (2013). Corporate social responsibility in business-to-business markets: How organizational customers account for supplier corporate social responsibility engagement. Journal of Marketing,77(6), 54–72.

    Google Scholar 

  • Iacus, S. M., King, G., & Porro, G. (2011). Causal inference without balance checking: Coarsened exact matching. Political Analysis,20, 1–24.

    Google Scholar 

  • Jo, H., & Harjoto, M. A. (2011). Corporate governance and firm value: The impact of corporate social responsibility. Journal of Business Ethics,103(3), 351–383.

    Google Scholar 

  • Jo, H., & Harjoto, M. (2014). Analyst coverage, corporate social responsibility, and firm risk. Business Ethics: A European Review,23(3), 272–292.

    Google Scholar 

  • Kane, J. (2001). The politics of moral capital. Cambridge: Cambridge University Press.

    Google Scholar 

  • Kellermanns, F. W. (2013). Spirituality and religion in family firms. Journal of Management, Spirituality & Religion,10(2), 112–115.

    Google Scholar 

  • Koiranen, M. (2002). Over 100 years of age but still entrepreneurially active in business: Exploring the values and family characteristics of old Finnish family firms. Family Business Review,15(3), 175–187.

    Google Scholar 

  • Konar, S., & Cohen, M. A. (2001). Does the market value environmental performance? Review of Economics and Statistics,83(2), 281–289.

    Google Scholar 

  • Le Breton-Miller, I., & Miller, D. (2019). Ideals-based accountability and reputation in family firms. Journal of Business Ethics.

  • Lee, E. M., Park, S. Y., & Lee, H. J. (2013). Employee perception of CSR activities: Its antecedents and consequences. Journal of Business Research,66(10), 1716–1724.

    Google Scholar 

  • Lumpkin, G. T., Brigham, K. H., & Moss, T. W. (2010). Long-term orientation: Implications for the entrepreneurial orientation and performance of family businesses. Entrepreneurship and Regional Development,22(3–4), 241–264.

    Google Scholar 

  • Malmendier, U., Tate, G., & Yan, J. (2011). Overconfidence and early-life experiences: The effect of managerial traits on corporate financial policies. Journal of Finance,66, 1687–1733.

    Google Scholar 

  • McGuire, S. T., Omer, T. C., & Sharp, N. Y. (2012). The impact of religion on financial reporting irregularities. The Accounting Review,87(2), 645–673.

    Google Scholar 

  • Miller, D., & Le Breton-Miller, I. (2005). Managing for the long run: Lessons in competitive advantage from great family businesses. Boston: Harvard Business Press.

    Google Scholar 

  • Miller, D., & Le Breton-Miller, I. (2014). Deconstructing socioemotional wealth. Entrepreneurship Theory & Practice,38(4), 713–720.

    Google Scholar 

  • Mola, S., Rau, P. R., & Khorana, A. (2012). Is there life after the complete loss of analyst coverage? The Accounting Review,88(2), 667–705.

    Google Scholar 

  • Neal, J., & Vallejo, M. C. (2008). Family firms as incubators for spirituality in the workplace: Factors that nurture spiritual businesses. Journal of Management, Spirituality & Religion,5(2), 115–159.

    Google Scholar 

  • Olsen, B. C., Sisodiya, S. R., & Swisher, J. (2016). A note on assessing the relation between CEO characteristics and stock performance: Alpha above Replacement. Accounting & Finance,56(3), 787–802.

    Google Scholar 

  • Pastor, L., & Veronesi, P. (2003). Stock prices and IPO waves (No. w9858). National Bureau of Economic Research.

  • Pastoriza, D., Arino, M. A., & Ricart, J. E. (2008). Ethical managerial behaviour as an antecedent of organizational social capital. Journal of Business Ethics,78(3), 329–341.

    Google Scholar 

  • Paterson, T. A., Specht, D., & Duchon, D. (2013). Exploring costs and consequences of religious expression in family businesses. Journal of Management, Spirituality & Religion,10(2), 138–158.

    Google Scholar 

  • Patten, D. M. (2008). Does the market value corporate philanthropy? Evidence from the response to the 2004 tsunami relief effort. Journal of Business Ethics,81(3), 599–607.

    Google Scholar 

  • Payne, G. T., Brigham, K. H., Broberg, J. C., Moss, T. W., & Short, J. C. (2011). Organizational virtue orientation and family firms. Business Ethics Quarterly,21(2), 257–285.

    Google Scholar 

  • Pérez-González, F. (2006). Inherited control and firm performance. American Economic Review,96(5), 1559–1588.

    Google Scholar 

  • Portes, A., & Sensenbrenner, J. (1993). Embeddedness and immigration: Notes on the social determinants of economic action. American Journal of Sociology,98(6), 1320–1350.

    Google Scholar 

  • Ramasamy, B., Yeung, M. C., & Au, A. K. (2010). Consumer support for corporate social responsibility (CSR): The role of religion and values. Journal of Business Ethics,91(1), 61–72.

    Google Scholar 

  • Rokeach, M. (1973). The nature of human values. New York: Free Press.

    Google Scholar 

  • Saroglou, V., Pichon, I., Trompette, L., Verschueren, M., & Dernelle, R. (2005). Prosocial behaviour and religion: New evidence based on projective measures and peer ratings. Journal for the Scientific Study of Religion,44(3), 323–348.

    Google Scholar 

  • Seifert, B., Morris, S. A., & Bartkus, B. R. (2003). Comparing big givers and small givers: Financial correlates of corporate philanthropy. Journal of Business Ethics,45(3), 195–211.

    Google Scholar 

  • Servaes, H., & Tamayo, A. (2013). The impact of corporate social responsibility on firm value: The role of customer awareness. Management Science,59(5), 1045–1061.

    Google Scholar 

  • Sharma, P., & Srinivas Rao, A. (2000). Successor attributes in Indian and Canadian family firms: A comparative study. Family Business Review,13(4), 313–330.

    Google Scholar 

  • Shleifer, A., & Vishny, R. W. (1986). Large shareholders and corporate control. Journal of Political Economy,94(3), 461–488.

    Google Scholar 

  • Sison, A. G. (2003). The moral capital of leaders: Why virtue matters. Northampton: Edward Elgar Publishing.

    Google Scholar 

  • Sorenson, R. L. (2013). How moral and social values become embedded in family firms. Journal of Management, Spirituality & Religion,10(2), 116–137.

    Google Scholar 

  • Stavrou, E., Kassinis, G., & Filotheou, A. (2007). Downsizing and stakeholder orientation among the Fortune 500: Does family ownership matter? Journal of Business Ethics,72(2), 149–162.

    Google Scholar 

  • Stiglitz, J. E. (2000). The contributions of the economics of information to twentieth century economics. Quarterly Journal of Economics,115, 1441–1478.

    Google Scholar 

  • Stulz, R. M., & Williamson, R. (2003). Culture, openness, and finance. Journal of Financial Economics,70(3), 313–349.

    Google Scholar 

  • Tàpies, J., & Ward, J. (Eds.). (2008). Family values and value creation: The fostering of enduring values within family-owned businesses. New York: Springer.

    Google Scholar 

  • Villalonga, B., & Amit, R. (2006). How do family ownership, control and management affect firm value? Journal of Financial Economics,80(2), 385–417.

    Google Scholar 

  • Viswanathan, M., & Rosa, J. A. (2010). Understanding subsistence marketplaces: Toward sustainable consumption and commerce for a better world. Journal of Business Research,63(6), 535–537.

    Google Scholar 

  • Vlachos, P. A., Panagopoulos, N. G., & Rapp, A. A. (2013). Feeling good by doing good: Employee CSR-induced attributions, job satisfaction, and the role of charismatic leadership. Journal of Business Ethics,118(3), 577–588.

    Google Scholar 

  • Ward, J. (Ed.). (2006). unconventional Wisdom: Counterintuitive insights for family business success. Chichester: Wiley.

    Google Scholar 

  • Weidner, K. L., Rosa, J. A., & Viswanathan, M. (2010). Marketing to subsistence consumers: Lessons from practice. Journal of Business Research,63(6), 559–569.

    Google Scholar 

  • Will, J. A., & Cochran, J. K. (1995). God helps those who help themselves?: The effects of religious affiliation, religiosity, and deservedness on generosity toward the poor. Sociology of Religion,56(3), 327–338.

    Google Scholar 

  • Wokutch, R. E., & Spencer, B. A. (1987). Corporate saints and sinners: The effects of philanthropic and illegal activity on organizational performance. California Management Review,29(2), 62–77.

    Google Scholar 

  • Yadav, P. L., Han, S. H., & Rho, J. J. (2016). Impact of environmental performance on firm value for sustainable investment: Evidence from large US firms. Business Strategy and the Environment,25(6), 402–420.

    Google Scholar 

  • Yan, J., & Sorenson, R. L. (2004). The influence of Confucian ideology on conflict in Chinese family business. International Journal of Cross Cultural Management,4(1), 5–17.

    Google Scholar 

  • Yan, J., & Sorenson, R. (2006). The effect of Confucian values on succession in family business. Family Business Review,19(3), 235–250.

    Google Scholar 

  • Ye, K., & Zhang, R. (2011). Do lenders value corporate social responsibility? Evidence from China. Journal of Business Ethics,104(2), 197–206.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. University of Saskatchewan, Saskatoon, Canada

    Min Maung

  2. HEC Montreal, Montréal, Canada

    Danny Miller

  3. Clark University, Worcester, USA

    Zhenyang Tang

  4. University of Rhode Island, Kingston, USA

    Xiaowei Xu

Authors
  1. Min Maung
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Danny Miller
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Zhenyang Tang
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Xiaowei Xu
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Zhenyang Tang.

Ethics declarations

Conflicts of interest

The authors have no conflict of interest to disclose.

Ethical Approval

This article does not contain any studies with human participants or animals performed by any of the authors.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Maung, M., Miller, D., Tang, Z. et al. Value-Enhancing Social Responsibility: Market Reaction to Donations by Family vs. Non-family Firms with Religious CEOs. J Bus Ethics 163, 745–758 (2020). https://doi.org/10.1007/s10551-019-04381-8

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10551-019-04381-8

Keywords

JEL Classification

Search

Navigation