We examine how agency conflict distorts the resource allocation in a business group with special attention to the incentives of the controlling shareholder. Specifically, we analyze whether the controlling shareholder’s wealth in each affiliate systematically affects the amount of corporate giving in that affiliate. We find that the affiliate in which a controlling shareholder has more (less) her own equity stake makes less (more) corporate giving. This result indicates that a controlling shareholder, pursing her own interest, intends to raise her reputation through corporate philanthropy with bearing less cost to her. This interpretation is also supported by other results including the relation between corporate giving and firm’s financial performance, effect of corporate governance on this relation, and result with the sub-sample of firms with family CEO’s. Generally, our findings are consistent with the exploitation hypothesis of corporate giving.​

 Keywords: Corporate Social Responsibility; Corporate Giving; Controlling Shareholder; Agency Problem
JEL: G32, G11, G01, L22​