Paper Title

Greed Is Good

Location

University of Washington Tacoma, Philip Hall

Event Website

http://www.tacoma.uw.edu/clsr/academic-conference

Start Date

11-7-2013 3:00 PM

End Date

11-7-2013 4:30 PM

Description

Recent experimental CSR research suggests that principal philanthropy offers benefits to the firm. I test this finding using archival data in a natural experiment. In publically traded firms, I find that charitable pledges by blockholders create agency problems that overwhelm any benefits and destroy shareholder value. This effect is stronger when the blockholder has, beyond his economic incentives, a fiduciary duty (as a director or fund manager) to monitor the firm and its managers. I attribute these findings to small investors relying on the self-interest of major shareholders to monitor managers and other investors. A charitable pledge lessens the market’s expectation of the philanthropic blockholder’s self-interest, which reduces the ability of minor shareholders to rely on him (and his preference for wealth-maximization) to monitor the firm.

Comments

Roger White is a PhD Candidate at the Robinson College of Business

White, Roger.pdf (493 kB)

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Jul 11th, 3:00 PM Jul 11th, 4:30 PM

Greed Is Good

University of Washington Tacoma, Philip Hall

Recent experimental CSR research suggests that principal philanthropy offers benefits to the firm. I test this finding using archival data in a natural experiment. In publically traded firms, I find that charitable pledges by blockholders create agency problems that overwhelm any benefits and destroy shareholder value. This effect is stronger when the blockholder has, beyond his economic incentives, a fiduciary duty (as a director or fund manager) to monitor the firm and its managers. I attribute these findings to small investors relying on the self-interest of major shareholders to monitor managers and other investors. A charitable pledge lessens the market’s expectation of the philanthropic blockholder’s self-interest, which reduces the ability of minor shareholders to rely on him (and his preference for wealth-maximization) to monitor the firm.

http://digitalcommons.tacoma.uw.edu/clsr_academic/2013/pres/3