Market reactions and corporate philanthropy: A case study of the Wenchuan earthquake in China

This paper studies the market reactions to corporate philanthropic giving in response to the 12 May 2008 Wenchuan earthquake in Sichuan, China. Based on a sample of 136 Chinese listed companies, our results indicate a significant and positive seven-day cumulative abnormal rise in the share prices of those companies making donations compared to those not making donations. Both timeliness and the amount of philanthropic giving generate significant market reactions, confirming Godfrey's assertion that corporate philanthropy can be perceived as a genuine manifestation of firms' underlying desire to raise their market values. However, when the sample firms are divided into two groups, government controlled and non-government controlled, Godfrey's assertion is challenged by our empirical results which show different market responses to the two different types of companies.