- Corporate giving •
- charitable contributions •
- private benefits of control •
- financing decisions •
- Hedge Fund Activism
We find corporate giving as a private benefit of control distorts investment and financing decisions, for reasons consistent with Jensen’s (1986) free cash flow theory. Such investment distortions reduce shareholder wealth, especially in internally cash-financed, diversifying acquisitions. Corporate giving also encourages managers to avoid external financing, especially debt financing.