Charitable giving by U.S. corporations nearly tripled over the past two decades, increasing from $13 billion in 2003 to more than $40 billion in 2024. Philanthropy has become a central part of how large firms present themselves to stakeholders and communities. Yet we still know relatively little about whether, and how, firms deploy charitable resources strategically in major corporate decisions in which external stakeholders can directly impact performance, such as mergers and acquisitions (M&As).

​Targeted philanthropy around M&A deals

​In a forthcoming article in the Journal of Finance, “Targeted Philanthropy: Evidence from M&As,” I examine whether acquirers use charitable foundation funds to influence key stakeholders in takeover transactions. I study almost one million donations made by U.S. public acquirers in 6,067 M&A deals to examine acquirers’ donation patterns to counties in which targets operate establishments or in which target insiders are active in local nonprofits. I show that acquirers’ donations to target counties increase by 19% more in the two years preceding a deal announcement, compared to pseudo target counties matched on public status, headquarter (HQ) state, industry, and size. At the deal level, more than 1/5th of M&A deals by foundation-owning acquirers involves pre-announcement donations to target charities. On average, these donations amount to more than $1 million per deal, a level 40% higher than donations to pseudo target charities.

​This expansion in targeted philanthropy reflects a reallocation of funds away from counties that are less operationally important – especially distant counties without target operations, target-affiliated nonprofits, or acquirer establishments – and redirect those funds toward counties where the target is headquartered, runs major facilities, or where target insiders are active in local nonprofits. Exploiting the fact that not all takeover offers succeed, I document that acquirers reduce donations to target counties after withdrawing a takeover offer, even when considering arguably exogenous withdrawals following lost takeover contests and market crashes.

​How does philanthropy affect takeovers?

Donations can influence target stakeholder relations in various ways. First, targeted philanthropy can establish reciprocity with the target’s decision makers. I find that pre-announcement donations to charities affiliated with the target’s executives, directors, and blockholders increase up to 16% more. Donations also increase to target counties by firms operating employee stock option plans (ESOPs). Blockholder-affiliated donations revert to their baseline level post-announcement, reflecting acquirers’ reduced incentives to retain reciprocity with shareholders after deal approval. In contrast, CEO-affiliated donations decrease only if the target’s CEO is fired post-takeover and remain elevated if the CEO is retained.

Second, targeted charity can reduce worker opposition during the deal’s negotiations and integration. Pre-announcement donations to non-insider-affiliated charities increase in counties with high target employment, greater union coverage, or where workers recently engaged in strikes. These changes are driven by donations to local neighborhood- and employee-oriented charities. Post-announcement donations decrease after establishment closures and layoffs, and after events that reduce the visibility of acquirers’ charity.

Third, charity can be used to signal to regulatory bodies that decide on a deal’s approval. I find that acquirers in within-utilities deals increase donations to non-target-related counties in the target’s HQ state by 14% prior to the deal’s announcement. These patterns are not apparent in cross-industry deals or in within-industry deals between firms in unregulated industries. Exploiting the 2013 closure of the DoJ’s regional offices as a shock to antitrust enforcement, I show that donations to target counties do not significantly change post-closure, indicating that acquirers’ incentives to donate are distinct from a regulatory lobbying motive. In contrast, acquirers in within-industry deals increase post-announcement donations to non-target DoJ counties and withdraw donations after the DoJ offices closures, consistent with acquirers’ regulatory favor-seeking incentives in deals subject to antitrust scrutiny.

Deal outcomes

An M&A setting also provides insights into corporate charity’s economic effects. Pre-announcement donations to target insider-affiliated charities are, on average, associated with negative acquirer announcement returns, consistent with donating signalling agency-motivated behavior by acquirer management. However, donations targeting stakeholders that can impact deal terms and integration costs, such as blockholders and employees, are associated with significantly higher acquirer returns, lower deal premiums, and lower goodwill impairments.

​​Taken together, this evidence indicates that the business case for corporate philanthropy is context-specific. Some forms of giving – such as agency-driven donations – are associated with lower shareholder value, while others – especially those directed at blockholders and employees – are associated with lower premiums and lower integration costs.

​Governance and policy implications

The findings have several implications for boards, investors, and policymakers. First, they suggest that corporate charity can be used to influence insiders, employees, and regulators outside formal negotiations and deal terms. In firms where corporate insiders sit on foundation boards and have significant influence over grant-making, targeted philanthropic allocations around major transactions may warrant closer scrutiny by independent directors and investors.

​Second, philanthropy can be a powerful tool for managing labor frictions in M&A, potentially yielding sizable improvements in integration outcomes at relatively modest cash cost. Firms considering large or contentious transactions may treat giving strategies as part of the broader integration and stakeholder-engagement plan.

​Third, the paper highlights a transparency gap. While Form-990 filings and foundation disclosures provide some visibility ex post, there is typically limited contemporaneous disclosure in M&A filings or proxy materials about targeted charitable strategies toward insiders, employees, or regulators. Given the scale of the transfers and their potential to shift bargaining power and incentives, policymakers may wish to consider whether additional disclosure or governance safeguards are appropriate.

The full paper is available here.