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Doing good deeds in times of need: a strategic perspective on corporate disaster donations
Author(s) -
Muller Alan,
Kräussl Roman
Publication year - 2011
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.917
Subject(s) - reputation , hurricane katrina , landfall , stock (firearms) , perspective (graphical) , value (mathematics) , business , economics , natural disaster , financial economics , law , political science , geography , artificial intelligence , computer science , tropical cyclone , archaeology , machine learning , meteorology
Abstract Major corporations often respond charitably in times of disaster. However, disasters can also impose nontrivial costs on firms themselves, and under adverse conditions, firms typically donate less, not more. This paper takes a strategic perspective on corporate magnanimity in times of crisis by looking at the relationship between firm value, reputation, and donations by U.S. Fortune 500 firms in the case of Hurricane Katrina. In general, we find that Katrina's landfall was associated with significant negative abnormal stock returns. In particular, we find that a reputation for social irresponsibility was associated with both the greatest drop in stock prices and the greatest likelihood of making a subsequent charitable donation in response to the disaster. Copyright © 2011 John Wiley & Sons, Ltd.