Do Institutional Investors Drive Corporate Social Responsibility? International Evidence
78 Pages Posted: 28 Dec 2015 Last revised: 18 Jan 2018
Date Written: December 20, 2017
This paper assesses whether shareholders drive the environmental and social (E&S) performance of firms worldwide. Across 41 countries, we find that institutional ownership is positively associated with E&S performance with additional tests suggesting this relation is causal. Our evidence shows that institutions are motivated by both financial and social returns. Investors increase firms’ E&S performance following shocks that reveal financial benefits to E&S. In cross-section, investors increase firms’ E&S performance when they come from countries where there is a strong community belief in the importance of E&S issues, but not otherwise. Overall, these results indicate that investors drive firms’ E&S performance around the world and transplant their local social norms in that process.
Keywords: Corporate Social Responsibility, Institutional Investors, Social Norms, Culture
JEL Classification: G15, G23, G30, M14
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