Institutional Investors, Corporate Social Responsibility, and Stock Price Performance

31 Pages Posted: 1 Feb 2017

See all articles by Elizabeth Motta

Elizabeth Motta

School of Economics, Kyushu University

Konari Uchida

Kyushu University - Faculty of Economics

Date Written: January 31, 2017

Abstract

In 2006, the United Nations Global Compact launched Principles for Responsible Investment (PRI), and the Japanese Ministry of Environment advocated financial mechanisms for environmental protection. We find that institutional ownership in 2005 is positively related to the probability of subsequent improvements in environment ratings for Japanese firms. The result is especially evident for domestic institutional shareholders who signed up for the PRI. These results suggest that soft law aimed at institutional investors can enhance responsible business practices and that national government initiatives play an effective role. Finally, improved ratings in the environment category do not harm shareholder wealth.

Keywords: Corporate social responsibility, Environmental protection, Institutional ownership, Shareholder preference, UN PRI, Long-term stock return

JEL Classification: G32, G38, M14

Suggested Citation

Motta, Elizabeth and Uchida, Konari, Institutional Investors, Corporate Social Responsibility, and Stock Price Performance (January 31, 2017). Asian Finance Association (AsianFA) 2017 Conference, Available at SSRN: https://ssrn.com/abstract=2909307 or http://dx.doi.org/10.2139/ssrn.2909307

Elizabeth Motta

School of Economics, Kyushu University ( email )

6-19-1, Hakozaki, Higashiku
Fukuoka, 812-8581
Japan

Konari Uchida (Contact Author)

Kyushu University - Faculty of Economics ( email )

6-19-1, Hakozaki
Higashi-ku
Fukuoka, Fukuoka 8128581
Japan

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