Lev, Baruch, Christine Petrovits, and Suresh Radhakrishnan. "Is Doing Good Good for You? Yes, Charitable Contributions Enhance Revenue Growth." Working Paper, New York University Stern School of Business. June, 2006.

This strong study investigates the relationship between corporate charitable giving and sales growth for the 1989-2001 time period using a sample of 251 U.S. companies (companies with less than seven years of charitable giving were deleted from the sample). Charitable giving figures are derived from from the Taft Corporate Giving Directory and the National Center for Charitable Statistics. Financial data are from Compustat.

The authors demonstrate through a series of regressions that charitable giving is predictive of superior sales growth for firms where public perceptions matter for business results (those in the 'Consumer Goods' and 'Finance' sectors). These firms see a sales benefit from charitable giving, while other firms generally do not. Explicit tests are made to test the direction of causality, and the authors determine that it is charitable giving that leads sales, not vice-versa.

Control variables include well-known predictors of sales growth, including R&D expenditures, capital expenditures, advertising and promotion, and mergers and acquisitions. One portion of the analysis includes price/book ratio as a proxy for market expectations for sales growth. The authors also attempt to control for management quality using the "organization capital" measure introduced by Lev and Radhakrishnan (2005).

This study is the first strong empirical work we have seen on charitable contributions since Navarro (1988). The results are consistent with Orlitzky's (2004) finding that advertising effects are a key benefit of corporate social responsibility. This is an excellent example of good research on a single corporate social responsibility issue.

This study received an Honorable Mention in the 2006 Moskowitz Prize competition.