Touched by Quakes: Mortality Salience and Corporate Philanthropy

ABSTRACT

This study examines how natural catastrophes affect corporate philanthropic activities in China. Firms located in areas experiencing severe seismic losses increase charitable donations. The effect is stronger when firms demonstrate stronger social responsibility, operate in higher-mortality regions, and are led by female or elder CEOs, supporting the mortality salience hypothesis. We address endogeneity issues with an instrumental variable and a propensity score matching approaches. Furthermore, firms with higher charitable donations experience a more positive stock market reaction around the 2008 Wenchuan Earthquake. Overall, our findings suggest that natural catastrophes amplify financial market participants’ mortality salience and affect their economic decisions.

KEYWORDS:

• Corporate philanthropy
• earthquakes
• natural disasters
• mortality salience
• market reactions

JEL:

• G30
• G41
• Q54

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/1540496X.2024.2347402

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1. Since the twentieth century, nearly 800 earthquakes above magnitude 6 have occurred in China, covering almost all provinces, autonomous regions, and municipalities. http://ikcest-drr.osgeo.cn/tutorial/p0459

2. http://www.charityalliance.org.cn/news/14364.jhtml

3. Mortality salience hypothesis suggests that although geographical distance may not inherently contribute to a moral difference, it can create a psychological difference through the salience of the different needs at stake. The visible suffering of deaths witnessed firsthand elicits a very different emotional impact compared to receiving information and images from the news. Therefore, this difference in emotional impact validates our argument to categorize corporate leaders of firms that have experienced earthquakes in their headquarters as those most affected by mortality salience.

4. https://mzj.km.gov.cn/c/2021-03-16/3864021.shtml

5. Internet Appendix Figure 1 shows the map of seismic zones for Chinese provinces ranked by the Institute of Geographic Sciences and Resources, Chinese Academy of Sciences. Internet Appendix Figure 2 shows that most earthquakes with 7.0 magnitude and above happened in the earthquake-prone provinces with only a few exceptions.

6. On the afternoon of May 12, 2008, a massive earthquake measuring 8.0 on the Richter scale occurred in Wenchuan County, Sichuan Province, China. The earthquake quickly spread to other neighboring areas in the Sichuan region, with approximately 15 million people living in the affected areas. The earthquake caused 450,000 casualties, up to 11 million homeless people, and direct economic losses of 845.2 billion CNY, far exceeding the intensity and casualties caused by the 1976 Tangshan earthquake.

Additional information

Funding

The work was supported by the Capital University of Economics and Business [QNTD202301]; National Natural Science Foundation of China [72202225].