Corporate philanthropy in the pakistani textile sector: evidence on slack resources, advertising intensity and past financial performance

Abstract

Literature provide various perspectives on corporate philanthropy but none the less there is general consensus on the fact that being discretionary in nature it requires discretionary resources of the firm that are labeled as slack resources. Several variables can affect the relationship between the organizational slack and corporate philanthropy such as the firms that are willing to spend more on advertising tend to be more generous in allocating organizational slack to philanthropic activities and similarly the firms with better past financial performance tend to direct more slack resources to social causes. This study is intended to examine the relationship between corporate philanthropy and slack resources and moreover it analyzes the role of advertising intensity and past financial performance in the respective relationship of slack resources and corporate philanthropy. The sample of the study consisted of 80 textile companies in Pakistan. The estimation method used for analysis was random effects model. The findings indicate that slack resources has a significant positive relationship with corporate philanthropy whereas advertising intensity and past financial performance doesn’t moderates the relationship between slack resources and corporate philanthropy.