Institutional Ownership Horizon, Corporate Social Responsibility and Shareholder Value

61 Pages Posted: 23 Oct 2017 Last revised: 3 Jun 2019

See all articles by Otgontsetseg Erhemjamts

Otgontsetseg Erhemjamts

Bentley University - Department of Finance; Bentley University

Kershen Huang

Nova Southeastern University - H. Wayne Huizenga School of Business & Entrepreneurship

Date Written: May 29, 2019

Abstract

A widely held view among policymakers, corporate executives and the media is that short-termism among institutional investors is increasingly prevalent. However, some institutional investors are increasingly vocal about taking a long-term approach, and these investors care about environmental, social and governance (ESG) issues. The reality is that investors are a diverse set of stakeholders with various objectives and time horizons. In the academic literature, empirical evidence on the relationship between institutional ownership horizon and corporate social responsibility (CSR) has been mixed. In this paper, we show that institutions with longer (shorter) investment horizons promote (discourage) CSR at the firm level. In addition, the higher the proportion of long-term (short-term) investors, the higher (lower) the effect of CSR on long-term (short-term) buy-and-hold returns. These findings are consistent with the view that short-termism on the part of institutional investors places short-term pressure on companies, and therefore discourages long-term investments that create value.

Keywords: Corporate Social Responsibility, Institutional Investors, Investment Horizon, Short-Termism, Long-Term Investing

JEL Classification: A13, G23, M14

Suggested Citation

Erhemjamts, Otgontsetseg and Huang, Kershen, Institutional Ownership Horizon, Corporate Social Responsibility and Shareholder Value (May 29, 2019). Journal of Business Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3056847 or http://dx.doi.org/10.2139/ssrn.3056847

Otgontsetseg Erhemjamts (Contact Author)

Bentley University - Department of Finance ( email )

175 Forest Street
Waltham, MA 02154
United States
781-891-2823 (Phone)

Bentley University ( email )

175 Forest Street
Waltham, MA 02145
United States
781-891-2823 (Phone)
781-891-2896 (Fax)

Kershen Huang

Nova Southeastern University - H. Wayne Huizenga School of Business & Entrepreneurship ( email )

3301 College Avenue
Fort Lauderdale, FL 33314
United States

HOME PAGE: http://bit.ly/kershenhuang

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