Institutional Ownership and Corporate Social Responsibility: The Moderating Effect of Geographic Proximity

57 Pages Posted: 9 Sep 2015 Last revised: 30 May 2016

See all articles by Kiyoung Chang

Kiyoung Chang

University of South Florida Sarasota-Manatee - College of Business

Jean D. Kabongo

University of South Florida

Ying Li

University of Washington, Bothell - Business

Date Written: May 13, 2016

Abstract

This paper investigates the impact of the ownership by institutional investors who are geographically close (local) and have long-term investment horizons (long-term) on corporate social responsibility (CSR) activities. Using a panel data of S&P 500 firms over the period between 1995 and 2009, we show a differential relation between corporate social performance (CSP) and long-term institutional investors that varies in geographic proximity to the firms they invest in. Specifically, long-term institutional ownership that is geographically proximate (local) is associated with higher corporate social performance, especially CSR strengths, while non-local long-term institutional ownership is not associated with CSR strengths. The positive relation between local long-term institutional ownership and CSP is more pronounced in firms where the dealing of soft information, which is hard to quantify, is necessary. The results are robust to various tests and are consistent with the Stakeholder Salience Theory premises, as local long-term institutional owners are stakeholders with high salience.

Keywords: Institutional ownership, long-term investment horizon, corporate social responsibility, stakeholder salience, geographic proximity, soft information

JEL Classification: G30; G23

Suggested Citation

Chang, Kiyoung and Kabongo, Jean D. and Li, Ying, Institutional Ownership and Corporate Social Responsibility: The Moderating Effect of Geographic Proximity (May 13, 2016). Available at SSRN: https://ssrn.com/abstract=2657881 or http://dx.doi.org/10.2139/ssrn.2657881

Kiyoung Chang

University of South Florida Sarasota-Manatee - College of Business ( email )

8350 N. Tamiami Trail, SMC-C263
Sarasota, FL 34243-2025
United States
9413594359 (Phone)
9413594367 (Fax)

Jean D. Kabongo

University of South Florida ( email )

Tampa, FL 33620
United States

Ying Li (Contact Author)

University of Washington, Bothell - Business ( email )

18115 Campus Way NE
Bothell, WA 98011-8246
United States

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