Institutional Shareholders and Corporate Social Responsibility

63 Pages Posted: 27 Feb 2017 Last revised: 16 Aug 2019

See all articles by Tao Chen

Tao Chen

Nanyang Technological University (NTU) - Division of Banking & Finance

Hui Dong

Shanghai University of Finance and Economics - School of Accountancy

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Date Written: May 2019

Abstract

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

Suggested Citation

Chen, Tao and Dong, Hui and Lin, Chen, Institutional Shareholders and Corporate Social Responsibility (May 2019). Second Annual Volatility Institute at NYU Shanghai (VINS) 2016. Available at SSRN: https://ssrn.com/abstract=2924752 or http://dx.doi.org/10.2139/ssrn.2924752

Tao Chen (Contact Author)

Nanyang Technological University (NTU) - Division of Banking & Finance ( email )

S3-B1A-08, Nanyang Avenue
Singapore, 639798
Singapore

Hui Dong

Shanghai University of Finance and Economics - School of Accountancy ( email )

No. 777 Guoding Road, Shanghai
Shanghai, 200433
China

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

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