Doing good right: building resilience through donations during the pandemic

Abstract

PurposeWhile researchers recognize the significance of philanthropic donations in disaster relief and recovery, the benefits that firms derive from such donations remain unclear, particularly when firms are adversely impacted by the disaster. To address this gap, this study seeks to elucidate the impact of various donation strategies on firm resilience in the context of the COVID-19 pandemic.Design/methodology/approachBased on the hand-collected data on donations, the authors employ ordinary least squares regressions to investigate the effectiveness of various donation strategies – including type, timing and location – in enhancing firm resilience in terms of the severity of stock price losses during the pandemic. To address potential endogeneity concerns, the authors use a two-stage least squares regression with instrumental variables.FindingsThis study finds robust evidence that certain donation strategies are more effective at mitigating stock price losses during the pandemic. Specifically, the authors find that in-kind donations (compared to monetary ones), earlier donations (compared to later ones) and donations targeting severely impacted areas (Hubei province vs. other places) are more effective methods to reduce the severity of stock price losses.Originality/valueThis study points out an alternative mechanism through which donations influence firm resilience during a crisis context and provides important managerial implications for firms to better engage in disaster donations.