Do Institutional Investors Drive Corporate Social Responsibility? International Evidence

66 Pages Posted: 28 Dec 2015 Last revised: 21 Dec 2016

I. J. Alexander Dyck

University of Toronto - Rotman School of Management

Karl V. Lins

University of Utah - Department of Finance

Lukas Roth

University of Alberta - Department of Finance and Statistical Analysis

Hannes F. Wagner

Bocconi University - Department of Finance; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research

Date Written: December 20, 2016

Abstract

This paper assesses whether the environmental and social (E&S) performance of firms worldwide is driven by shareholders — an important channel to study because it is their money being spent. Across 41 countries, we find that institutional ownership is positively associated with firm-level E&S performance with multiple tests suggesting this relation is causal. We test whether investors are motivated by their local social norms towards E&S issues. 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, our results indicate that institutional 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

Suggested Citation

Dyck, I. J. Alexander and Lins, Karl V. and Roth, Lukas and Wagner, Hannes F., Do Institutional Investors Drive Corporate Social Responsibility? International Evidence (December 20, 2016). Rotman School of Management Working Paper No. 2708589; 2nd Annual Financial Institutions, Regulation and Corporate Governance Conference. Available at SSRN: https://ssrn.com/abstract=2708589 or http://dx.doi.org/10.2139/ssrn.2708589

I.J. Alexander Dyck

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S 3E6
Canada
416-946-0819 (Phone)

Karl V. Lins

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States
801-585-3171 (Phone)
801-581-7214 (Fax)

Lukas Roth (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32E Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-4431 (Phone)
780-492-3325 (Fax)

Hannes F. Wagner

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://faculty.unibocconi.eu/hanneswagner

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

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