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

See all articles by Ioannis Oikonomou

Ioannis Oikonomou

University of Reading - ICMA Centre

Chao Yin

Durham University - Department of Economics and Finance

Lei Zhao

ESCP Business School

Date Written: September 30, 2017

Abstract

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

Oikonomou, Ioannis and Yin, Chao and Zhao, Lei, Investment Horizon and Corporate Social Performance: The Virtuous Circle of Long-Term Institutional Ownership and Responsible Firm Conduct (September 30, 2017). ICMA Centre Discussion Paper No. ICM-2017-06, Available at SSRN: https://ssrn.com/abstract=3045946 or http://dx.doi.org/10.2139/ssrn.3045946

Ioannis Oikonomou (Contact Author)

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom

Chao Yin

Durham University - Department of Economics and Finance ( email )

Durham, DH1 3HY
United Kingdom

Lei Zhao

ESCP Business School ( email )

79 Avenue de la République
Paris, 75011
France

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