Economic impact of corporate foundations: an event analysis approach

Abstract

This study explores the relationship between the creation of a corporate foundation and the corporation’s stock market value. The article looks at how a corporation’s market value is influenced by: (a) philanthropic behavior and its communication, (b) brand architecture, and (c) the business sector. Corporations had to: (a) have an associated corporate foundation, and (b) be listed on one of the four global stock markets selected when the creation of their foundation was announced. Data were collected for 300 corporations using the FACTIVA database. 22 corporations were found to meet the inclusion criteria. An event model allowed calculation of cumulative abnormal returns (CARs). A dependence model analyzed the relationships between CARs and selected characteristics. Findings show factors that increase the positive impact on the stock market: (1) omitting mention of the foundation’s financial resources from announcements about the foundation’s creation, and (2) basing the brand architecture on an endorsed brand strategy.