Corporate Giving, Competition and the Economic Cycle
This paper addresses firms' decisions on Corporate Social Responsibility (CSR) investments as a function of the prevailing macroeconomic context, namely under an economic crisis, a relevant scenario for many world economies nowadays. We focus on the corporate giving dimension of CSR. Under unfavorable macroeconomic conditions two possible situations may, a priori, occur: firms decide to restrict their CSR contributions in order to save resources, or they use CSR to differentiate more effectively. To address this issue, we derive a general theoretical framework comprising product differentiation and firm competition in two dimensions: price and corporate giving. Corporate giving as a share of firm’s revenues is found to be lower the less sensitive demand is to rivals’ pricing policies, and the more sensitive demand is to rivals’ CSR. We prove that, in equilibrium, all the rest equal, profit maximizing firms will make less CSR contributions when the business cycle is unfavorable, independently of the market structure. We then provide empirical testing and validation of the theoretical model’s results through a comprehensive battery of econometric tests and real data evidence. We also inspect the business cycle properties of corporate giving, as well as that of receipts, concluding for a procyclical relation with real
|Date of creation:||May 2012|
|Contact details of provider:|| Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL|
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lanne, Markku & Lütkepohl, Helmut & Saikkonen, Pentti, 1999.
"Comparison of unit root tests for time series with level shifts,"
SFB 373 Discussion Papers
1999,88, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Lanne, Markku & Lütkepohl, Helmut & Saikkonen, Pentti, 2002. "Comparison of Unit Root Tests for Time Series with Level Shifts," MPRA Paper 76035, University Library of Munich, Germany.
- David P. Baron, 2001. "Private Politics, Corporate Social Responsibility, and Integrated Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 7-45, 03.
- Sandra Cavaco & Patricia Crifo, 2013. "The CSR-Firm Performance Missing Link: Complementarity Between Environmental, Social and Business Behavior Criteria?," Working Papers hal-00504747, HAL.
- Candelon, Bertrand & Lutkepohl, Helmut, 2001.
"On the reliability of Chow-type tests for parameter constancy in multivariate dynamic models,"
Elsevier, vol. 73(2), pages 155-160, November.
- Candelon, Bertrand & Lütkepohl, Helmut, 2000. "On the reliability of chow type test for parameter constancy in multivariate dynamic models," SFB 373 Discussion Papers 2000,95, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Catherine J. Morrison-Paul & Donald S. Siegel, 2006. "Corporate Social Responsibility and Economic Performance," Rensselaer Working Papers in Economics 0605, Rensselaer Polytechnic Institute, Department of Economics.
- Roland Benabou & Jean Tirole, 2010.
"Individual and Corporate Social Responsibility,"
London School of Economics and Political Science, vol. 77(305), pages 1-19, 01.
- Jean Tirole & Roland Bénabou, 2010. "Individual and Corporate Social Responsibility," Working Papers 2010.23, Fondazione Eni Enrico Mattei.
- Bénabou, Roland & Tirole, Jean, 2009. "Individual and Corporate Social Responsibility," TSE Working Papers 09-109, Toulouse School of Economics (TSE).
- Benabou, Roland & Tirole, Jean, 2009. "Individual and Corporate Social Responsibility," IZA Discussion Papers 4570, Institute for the Study of Labor (IZA).
- Bryan W. Husted & José de Jesus Salazar, 2006. "Taking Friedman Seriously: Maximizing Profits and Social Performance," Journal of Management Studies, Wiley Blackwell, vol. 43(1), pages 75-91, 01.
- Markus Kitzmueller, 2008. "Economics and Corporate Social Responsibility," Economics Working Papers ECO2008/37, European University Institute.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
- James G. MacKinnon & Alfred A. Haug & Leo Michelis, 1996.
"Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration,"
1996_07, York University, Department of Economics.
- MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 563-577, Sept.-Oct.
- Mackinnon, J.G. & Haug, A.A. & Michelis, L., 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," G.R.E.Q.A.M. 96a09, Universite Aix-Marseille III.
- Mark Bagnoli & Susan G. Watts, 2003. "Selling to Socially Responsible Consumers: Competition and The Private Provision of Public Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 419-445, 09.
- Mark LeClair & Kelly Gordon, 2000. "Corporate Support for Artistic and Cultural Activities: What Determines the Distribution of Corporate Giving?," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 24(3), pages 225-241, August.
- Scholtens, Bert, 2008. "A note on the interaction between corporate social responsibility and financial performance," Ecological Economics, Elsevier, vol. 68(1-2), pages 46-55, December.
- Lawrence J. Christiano & Terry J. Fitzgerald, 1999.
"The Band pass filter,"
9906, Federal Reserve Bank of Cleveland.
- Geoffrey Heal, 2005. "Corporate Social Responsibility: An Economic and Financial Framework," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 30(3), pages 387-409, July.
- Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
- Navarro, Peter, 1988. "Why Do Corporations Give to Charity?," The Journal of Business, University of Chicago Press, vol. 61(1), pages 65-93, January.
- Catherine M. Paul & Donald Siegel, 2006. "Corporate social responsibility and economic performance," Journal of Productivity Analysis, Springer, vol. 26(3), pages 207-211, December.
- MacKinnon, James G, 1996.
"Numerical Distribution Functions for Unit Root and Cointegration Tests,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 11(6), pages 601-618, Nov.-Dec..
- James G. MacKinnon, 1995. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Working Papers 918, Queen's University, Department of Economics.
- Mike Adams, 1998. "An Analysis of Corporate Donations: United Kingdom Evidence," Journal of Management Studies, Wiley Blackwell, vol. 35(5), pages 641-654, 09.
- Louis Amato & Christie Amato, 2007. "The Effects of Firm Size and Industry on Corporate Giving," Journal of Business Ethics, Springer, vol. 72(3), pages 229-241, May.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
When requesting a correction, please mention this item's handle: RePEc:ise:isegwp:wp152012. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vitor Escaria)
If references are entirely missing, you can add them using this form.