Corporate Social Responsibility and Large Shareholders: An Analysis of European Firms
34 Pages Posted: 21 May 2009 Last revised: 28 Nov 2014
Date Written: May 21, 2009
We analyze the influence of firm ownership structure on corporate social responsibility (CSR) as measured by the Dow Jones Sustainability STOXX Index and the Ethibel Excellence Index. Using data from 1,248 firms from five major European Union countries (United Kingdom, Germany, France, Italy, and Spain) for 2000-2004, we find that the power of the largest shareholder is negatively related to CSR. That is, as the proportion of shares owned by the largest shareholder increases, his or her incentives to engage in CSR decreases. Similarly, we find that a higher contest to the power of the main shareholder by other reference shareholders improves the firm's commitment to socially responsibility actions. Additional results suggest that, conditional on the availability of profitable growth opportunities, family shareholders are more prone to CSR than other types of investors, and, conversely, the percentage of ownership in the hands of institutional investors is negatively related to CSR.
Keywords: corporate ownership structure, corporate social responsibility, family shareholders, growth opportunities, institutional investors
JEL Classification: M14, O16, G32
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