Investment Horizon and Corporate Social Performance: The Virtuous Circle of Long-Term Institutional Ownership and Responsible Firm Conduct
ICMA Centre Discussion Paper No. ICM-2017-06
48 Pages Posted: 2 Oct 2017
Date Written: September 30, 2017
We investigate the relationship between corporate social performance and institutional ownership. We distinguish between long-term and short-term institutional investors using holdings-based measures which directly capture the investment horizon of each institution. Our analysis shows that long term institutional investment is positively related to corporate social performance (mainly by an avoidance of investing in firms with significant controversies) whereas short-term institutional investment is negatively related to corporate social performance. Further investigation reveals that increased holdings of a firm by long-term investors are positively associated with its future corporate social performance. Hence, we provide evidence of a ‘virtuous circle’ between long term investment and social responsibility.
Keywords: Corporate Social Responsibility, CSR, CSP, Sustainability, Institutional Investors, Investment Horizon
JEL Classification: G23, G31, M14
Suggested Citation: Suggested Citation