Cara Vansteenkiste

The Strategic Side of Charity: Evidence from M&As

Jan 29, 2026

Key Takeaways

  • Research Question: Do firms use charitable giving to manage target stakeholder relations prior to mergers and acquisitions (M&As)?
  • Data and Method: Combining granular donation data for US corporate foundations in a deal-county-year panel, the study investigates how acquirer donations to target counties—relative to control counties—change around M&A announcements.
  • Findings:
    • Acquirers increase donations to target counties by 19% in the two years preceding a deal announcement compared to pseudo-target counties.
    • This increase reflects a reallocation of charitable funds from distant non-target-related counties to counties with important target operations or stakeholders.
    • Charitable funds are directed to charities affiliated with target insiders (executives, directors, blockholders) to elicit reciprocity and to counties with high target employment to increase employee support.
    • Whereas donations to non-blockholder insiders are associated with lower acquirer returns, donations to blockholder-affiliated and employee-targeted are associated with higher returns, because they enable lower deal premiums and reduce integration costs.
  • Implications: These findings show corporate charity can align financial and pro-social interests, but they also highlight a need for better governance and transparency in nonprofits to ensure resources advance social objectives rather than corporate self-interest.

Source Publication:

Cara Vansteenkiste (2025). “The Strategic Side of Charity: Evidence from M&As.” SSRN Working Paper.

Background and Research Focus

Corporations do not operate in isolated environments; their decisions and performance are influenced directly and indirectly by many other stakeholders, including investors, employees, regulators, communities, and advocacy groups.  To navigate these relationships, firms often adopt non-market tools such as lobbying, networking, and charity.

 

This paper investigates corporate charitable giving as an increasingly important non-market strategy for managing stakeholder relations—one that is directly observable, measurable, and comparable across firms, recipients, and time. Targeted giving can elicit reciprocal behavior from target insiders, while also demonstrating corporate citizenship and establishing commitment with target employees.

 

This paper investigates these mechanisms in the context of mergers and acquisitions (M&As), which rely on the support from target insiders, shareholders, and employees to succeed. Specifically, it asks whether firms strategically allocate charitable funds to facilitate the takeover process and deal outcomes.

Data and Methodology

The study combines U.S. corporate charitable giving data from Candid’s Foundation Directory Online with M&A data from the Securities Data Company (SDC), covering 6,067 domestic acquisitions by publicly listed, foundation-owning acquirers between 2006 and 2021.

 

To identify firms’ allocation of charitable funds, the analysis constructs a deal-county panel dataset enabling the inclusion of fine-grained fixed effects at the deal × year, county × year, and deal × county level. It compares donations to target counties—defined as those with target establishments with target insider-affiliated charities—with donations made to matched pseudo-target counties, same-state counties, and acquirer counties.

Findings

Acquirers strategically increase charitable donations to target counties, with contributions rising by 19% relative to control counties in the two years before deal announcements. These donations increase further prior to a deal withdrawal and revert to baseline post-withdrawal, highlighting their strategic intent. The increase reflects a reallocation of charitable funds from distant, non-target-related counties, which decline by up to 10%, while contributions to counties with important target operations or affiliated charities increase by up to 129%.

 

Charitable giving influences M&As through multiple channels. First, donations elicit reciprocity from insiders. Donations to charities affiliated with executives, directors, and blockholders increase before deal announcements, consistent with models of enforced reciprocity. Donations to blockholder-affiliated charities increase by 16.4% and correlate with 1.7% lower deal premiums, whereas CEO-affiliated contributions, which increase prior to the deal and decrease if CEOs are removed, signal potential agency-motivated empire-building deals and are associated with 1.56% lower acquirer returns.

 

Second, donations establish target employee commitment, especially in high-employment counties, counties with recent strikes, and high-unionization counties. These donations are concentrated in charities aligned with employees’ private values, such as neighborhood charities and charities associated with employee matching programs. Employee-focused giving is associated with higher acquirer returns by reducing goodwill impairments, reflecting a smoother post-merger integration process.

 

Third, charitable giving can secure regulatory favor. Although distinct from direct target stakeholder-affiliated giving, donations within the target’s home state increase prior to deals between firms in state-regulated industries, and they increase in counties with Department of Justice offices in within-industry deals. Regulatory-targeted donations are associated with faster deal completion.

Policy and Market Implications

These findings show corporate charitable giving can serve as a non-market tool for managing stakeholder relations, aligning corporate interests with contributions to local communities. Nevertheless, they also highlight the need to address governance and transparency gaps in nonprofits to ensure charitable resources primarily serve social objectives rather than corporate goals.

For firms, the results show charitable giving can provide financial benefits, by reducing labor-related frictions, establishing stakeholder reciprocity, and providing reputational benefits. They indicate small, well-placed donations may provide large benefits in the right context.

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