Risk reduction effect of hospitality philanthropic giving: Theoretical framework and empirical evidence

Abstract

This study contributes to the philanthropic giving (PG) research literature by proposing a risk reduction effect of hospitality PG based on value enhancement theory and the capital asset pricing model (CAPM) to develop a theoretical framework, and by conducting empirical examinations to provide evidence of and support for the risk reduction effect. To determine whether PG can reduce the risks of China’s publicly traded hospitality firms, the study uses the CAPM to compute the systematic and unsystematic risks of hospitality firms, and conducts dynamic panel regression tests based on the system generalized method of moments. Test results reveal that PG has a significantly negative impact on unsystematic risk but no influence on systematic risk, supporting the risk reduction effect of hospitality PG. Furthermore, this risk reduction effect is asymmetric. Specifically, PG is found to reduce unsystematic risk more during periods of business contraction than during periods of business expansion.