Investor Tastes, Corporate Behavior and Stock Returns: An Analysis of Corporate Social Responsibility

43 Pages Posted: 17 Feb 2015

See all articles by Chuan-Yang Hwang

Chuan-Yang Hwang

Nanyang Technological University (NTU)

Sheridan Titman

University of Texas at Austin - Department of Finance; National Bureau of Economic Research (NBER)

Ying Wang

Central University of Finance and Economics (CUFE)

Date Written: February 3, 2015

Abstract

We classify institutions into socially responsible institutions (SRI) and non-socially-responsible institutions (NSRI) based on the value weighted Corporate Social Responsibility (CSR) scores of their portfolio holdings. Controlling for CSR scores, stocks that experience an increase in NSRI ownership realize positive excess returns the following quarter. The positive relation between excess returns and NSRI ownership is stronger for stocks with higher CSR scores. We also find that CSR scores tend to increase more for stocks with lower NSRI holdings. These results, which are consistent with the existence of excess CSR expenditures that reduce firm values, suggest that the mix of institutional investors influences CSR choices.

Keywords: Corporate Social Responsibility, institutional ownership

JEL Classification: M14

Suggested Citation

Hwang, Chuan-Yang and Titman, Sheridan and Wang, Ying, Investor Tastes, Corporate Behavior and Stock Returns: An Analysis of Corporate Social Responsibility (February 3, 2015). Available at SSRN: https://ssrn.com/abstract=2559590 or http://dx.doi.org/10.2139/ssrn.2559590

Chuan-Yang Hwang (Contact Author)

Nanyang Technological University (NTU) ( email )

Singapore, 639798
Singapore
65-67905003 (Phone)
65-6791-3697 (Fax)

Sheridan Titman

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-232-2787 (Phone)
512-471-5073 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ying Wang

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

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