Profit maximisation vs. agency: an analysis of charitable giving by UK firms

Abstract

The charitable giving of a large sample of publicly quoted UK firms is analysed within a model that explores the profit maximisation and managerial utility enhancement motives for giving. The empirical method draws a distinction between the decision to participate in giving and the determination of the amount of corporate contributions. Firm size and advertising intensity are found to be positively associated with the probability of participation in giving. Stricter corporate governance and the rate of directors' remuneration are negatively related to the probability of participation. Among givers, the rate of giving is related positively to R&D intensity, the rate of directors' remuneration, and corporate profitability and negatively to firm indebtedness.