BASIC RESEARCH

Basic Research addresses fundamental questions related to philanthropy and social innovation. By exploring fundamental issues, our basic research indirectly affects the social sector at large.

DOES SHOWING POVERTY AFFECT DONATIONS? AN EXPERIMENT ON REDISTRIBUTION AND GIVING IN SINGAPORE

Frank Roeland Hubers

Thisstudy investigatesthe relationship between poverty awareness and the willingnessto redistribute income, using an incentivised lab experiment with a between‐subjects design. Participants watched one (randomly determined) film out of three possible films for a translation exercise. Those in the treatment condition watched a film about poverty in Singapore; the other two filmsserved as a control condition. I find that the showing the lives of people in poverty affect preferences for redistribution, making the viewer more tolerant towards a government redistribution of income. This effect remains robust even when controlled for emotional or mood states. I find no conclusive evidence of the impact of showing poverty on the viewer’s contributions to charity.    Showing poverty appears to have a positive effect on donations, but this effect reduces to close to zero when controlling for emotional and mood states.  The heterogeneity analysis indicates that the more the viewer likes the film, the more influence the images have on the donations of the participant.

CAN CORPORATE SOCIAL RESPONSIBILITY FILL INSTITUTIONAL VOIDS?

Swee-Sum Lam, Weina Zhang and Christopher Yuen Kwong Chien

Institutional voids refer to the absence of institutions or intermediaries that are instrumental in supporting business operations in a country. We conjecture that the corporate social responsibility (CSR) and firm valuation relation is moderated by the institutional frameworks that firms operate in, such that the presence of greater institutional voids will result in greater firm valuation for its CSR and vice versa. Using 134,823 observations of 2,542 firms across 44 countries from 2009 to 2014, we find supporting empirical evidence. Moreover, among different types of CSR activities, firms’ environmentally and socially responsible actions receive higher valuation in countries with weaker institutions. Overall, our findings suggest that CSR creates value for firms by filling institutional voids in their home country.

THE MISPRICING OF SOCIALLY AMBIGUOUS GREY STOCKS

Swee-Sum Lam, Weina Zhang and Gabriel Henry Jacob

The study examines how stock market prices the stocks of socially ambiguous “Grey” firms. These are firms that are socially responsible in certain corporate social responsibility (CSR) dimensions while being socially irresponsible in the same or other dimensions. Using the firm data from 1992 to 2011, we find that the “Grey” portfolio earns an annual abnormal return up to 3.6 percent relative to “Neutral” portfolio that consists of neither socially responsible nor irresponsible firms. Interestingly, “Community” and “Environment” sub-dimensions of CSR are the main drivers for the overpricing. The over-pricing phenomenon is robust and is not driven by small firms, the “Sin” stocks or “Controversial” industries. Overall, our results suggest that “Grey” firms are significantly mispriced by the market compared to their “Neutral” peers, plausibly due to the ambiguity in their social performance.

THE MODERATING EFFECT OF BUREAUCRATIC QUALITY ON THE PRICING OF POLICY INSTABILITY

Swee-Sum Lam and Weina Zhang

We examine how policy instability is priced in interest rates. Policy instability refers to the likelihood that the current policy will be changed in the future in the absence of political power shifts. Chinese government’s experimental policymaking approach provides an ideal set of frequent policy flip-flops which allows us to identify the effect of policy changes. Conditional on the bureaucratic quality of policymaking, a good-quality policy reversal is related to reductions in interest rate term spread and volatility; a bad-quality policy reversal is related to increases in the spread and volatility. The bureaucratic quality is multi-dimensional and the moderating effect is stronger on interest rates when it is measured more precisely.

DOES POLICY UNCERTAINTY MATTER FOR INTERNATIONAL EQUITY MARKETS?

Swee-Sum Lam and Weina Zhang

We test whether policy uncertainty affects international equity returns. We construct two measures of global policy uncertainty based on the ratings from international country risk guide. They capture the potential policy shock from government changes and the bureaucratic ability to reduce policy shocks. Both factors significantly affect equity returns in 49 countries from 1995 to 2006 and the bureaucratic factor carries an annual risk premium of 8 percent. The economic and institutional conditions within a country affect the return relation with the policy uncertainty. Overall, our study reveals the significance and distinct characterization of policy uncertainty in international equity markets.

FRAMING THE ROOTS OF PHILANTHROPY

Swee-Sum Lam, Gabriel Henry Jacob, and David Jeremiah Seah

This study provides a parsimonious methodological framework for synthesis of multidisciplinary determinants of philanthropic behavior. We find strong religious motivation for philanthropy, both directly in the religious sector and more significantly, indirectly with spillover effects, in the non-religious sectors. Interestingly, we find that religious spirituality and religious affiliation explain philanthropy independent of each other. Other independent roots of philanthropy include economic resources, intergenerational learning, and social integration.

VENTURE CAPITAL PRACTICES: DO THEY MATTER FOR THE EXPECTED PERFORMANCE OF SOCIAL INVESTMENT FUNDS?

Swee-Sum Lam, Siew Meng Leong and Sze-Min Lek

This is an exploratory study surveying social investment funds vis-à-vis green funds which apply traditional venture capital investment principles. We find that venture capital practices, to varying extent, do matter for the expected performance of social investment funds. Expected performance is measured using a blended value approach in three independent dimensions of financial, social and environmental returns. As constructs for contributions from venture capital practices, goal congruence, evaluation processes and value-add carry varying impact on expected fund performance. Extended engagement by social investment funds in value-add activities has no significant role to play in the social purpose organization’s performance in the near term. Goal congruence, which is being evaluated on in the deal screening phase, is found to positively and significantly influence all three returns. Evaluation processes in due diligence are associated with higher than expected financial returns only and have no significant impact on expected social or environmental returns.