Institutional Shareholders and Corporate Social Responsibility
63 Pages Posted: 27 Feb 2017 Last revised: 16 Aug 2019
Date Written: May 2019
This study uses two distinct quasi-natural experiments to examine the effect of institutional shareholders on corporate social responsibility (CSR). We first find that an exogenous increase in institutional holding caused by Russell Index reconstitutions improves portfolio firms’ CSR performance. We then find that firms have lower CSR ratings when shareholders are distracted due to exogenous shocks. Moreover, the effect of institutional ownership is stronger in CSR categories that are financially material. Furthermore, we show that institutional shareholders influence CSR through CSR-related proposals. Overall, our results suggest that institutional shareholders can generate real social impact.
Keywords: Institutional Ownership, Indexing, Shareholder Attention, Corporate Social Responsibility
JEL Classification: G23, G34, M14
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