Spillovers in the Charitable Market: Evidence from Reputation Shocks

Abstract

A negative reputation shock to one charity can affect similar charities positively through substitution, or negatively through collective reputation. Using sentiment analysis on media coverage, I identify large shocks and link directly affected charities to other charities by the textual similarity of their missions. I find that a negative shock increases donations to similar charities, but this effect is not captured by traditional sector-based indicators. This indicates that the charitable market is differentiated, where donors care about missions and substitute across similar ones. It further suggests that media publicity, as a tool to hold charities accountable, does not have negative externalities.