Do companies that do the right thing make better investments than those that don't?

Research by Dover Management in the US has shown that companies with a good relationship between philanthropy and operating earnings have outperformed the broader index by 3.5 percentage points a year over a five-year period.
Dover runs a mutual fund that invests in companies known for charitable giving. Michael Castine, president of Dover Management, said recently that if a company is known for its philanthropy, "it's an indicator of cash on its balance sheet. If there's a problem, the first thing to go is the philanthropic contributions."

However, comprehensive back-testing of investment performance over the past six years – conducted on behalf of Dover Management by Casey, Quirk & Associates and the University of Chicago’s Center for Research in Security Prices - confirms that philanthropic companies outperform those which are not charitably inclined on a material and consistent basis.

The findings are supported by a study published last year by Baruch Lev and Christine Petrovits of the New York University Stern School of Business and Suresh Radhakrishnan of the University of Texas at Dallas School of Management. The authors concluded that "corporate charitable contributions are effective in enhancing revenues in the 'consumer sectors,' such as retailers and financial services." Download the full report via the link below.

For more information about Dover Management and its research, visit its website